In 2 years, New York Co. is importing an equipment from Australia and has agreed to pay 13,000,000 for it. The spot rate of the Australian Dollar $0.75. Regardless of the debt maturity the annualized U.S interest rate is 6% and Australian dollar interest rate is 15%. Assume that interest rate parity exists. New York plans to hedge its exposure with a forward contract that it will arrange today. Determine the amount of US dollars that New York Co. will need in 2 years to make its payment. $5,678,098.32 $6,203,129.67 $8,283,629.49 $12.345.08
In 2 years, New York Co. is importing an equipment from Australia and has agreed to pay 13,000,000 for it. The spot rate of the Australian Dollar $0.75. Regardless of the debt maturity the annualized U.S interest rate is 6% and Australian dollar interest rate is 15%. Assume that interest rate parity exists. New York plans to hedge its exposure with a forward contract that it will arrange today. Determine the amount of US dollars that New York Co. will need in 2 years to make its payment. $5,678,098.32 $6,203,129.67 $8,283,629.49 $12.345.08
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:In 2 years, New York Co. is importing an equipment from Australia and has agreed to pay 13,000,000 for it. The spot rate of the Australian Dollar $0.75. Regardless of the debt maturity the
annualized U.S interest rate is 6% and Australian dollar interest rate is 15%. Assume that interest rate parity exists. New York plans to hedge its exposure with a forward contract that it will
arrange today. Determine the amount of US dollars that New York Co. will need in 2 years to make its payment.
$5,678,098.32
$6,203,129.67
$8,283,629.49
$12.345.08
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