Assume interest rate parity (IRP). The nominal one-year rate in the USA will be 15%, and in Australia it will be 11% for one year. The Australian dollar (AUD) SPOT exchange rate is 0.45 USD/AUD. AUD 15 million will be required in one year. A one-year Australian dollar (AUD) forward contract is purchased today. How many US dollars (USD) will be used in one year to fulfill your forward contract? The alternatives are a. Premium of 3.603604%, FWD exchange rate 0.466216216 AUD/USD and $6,993,243.24 USD to be needed. b. Premium of 3.603604%, FWD exchange rate 0.466216216 USD/AUD and $6,993,243.24 to be required. c. Discount of 3.478261%, FWD exchange rate 0.434347826 AUD/USD and $6,515,217.39 to be required. d. Discount of 3.478261%, FWD exchange rate 0.434347826 USD/AUD and $6,515,217.39 to be required.
Assume interest rate parity (IRP). The nominal one-year rate in the USA will be 15%, and in Australia it will be 11% for one year. The Australian dollar (AUD) SPOT exchange rate is 0.45 USD/AUD. AUD 15 million will be required in one year. A one-year Australian dollar (AUD) forward contract is purchased today. How many US dollars (USD) will be used in one year to fulfill your forward contract?
The alternatives are
a. Premium of 3.603604%, FWD exchange rate 0.466216216 AUD/USD and $6,993,243.24 USD to be needed.
b. Premium of 3.603604%, FWD exchange rate 0.466216216 USD/AUD and $6,993,243.24 to be required.
c. Discount of 3.478261%, FWD exchange rate 0.434347826 AUD/USD and $6,515,217.39 to be required.
d. Discount of 3.478261%, FWD exchange rate 0.434347826 USD/AUD and $6,515,217.39 to be required.
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