Fundamentals of Financial Management (MindTap Course List)
14th Edition
ISBN: 9781285867977
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Chapter 19, Problem 13P
a.
Summary Introduction
To determine: The price of the wine in US dollars at today’s spot rate.
Introduction:
Spot rate: Spot rate is the rate, which is used to make immediate settlement of the commodity and currency. Spot rate is also known as the spot price. Spot rate generally changes very frequently.
b.
Summary Introduction
To determine: The cost in USD if the payment is made in 90 days and the spot rate is equals today’s 90-day forward rate.
c.
Summary Introduction
To determine: The amount Person W have to pay for the wine in USD.
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Arvin Australian Imports has agreed to purchase 15,000 cases of Australian wine for 6 million Australian dollars at today's spot rate. The firm's financial manager, Sarah Vintnor, has noted the following current spot and forward rates:
U.S. Dollar/Australian Dollar
Australian Dollar/U.S. Dollar
Spot
0.7285
1.3727
30-day forward
0.7287
1.3723
90-day forward
0.7294
1.3710
180-day forward
0.7306
1.3687
On the same day, Vintnor agrees to purchase 15,000 more cases of wine in 3 months at the same price of 6 million Australian dollars.
a. What is the price of the wine in U.S. dollars if it is purchased at today's spot rate? Round your answer to the nearest cent.
$ ___
b. What is the cost in U.S. dollars of the second 15,000 cases if payment is made in 90 days and the spot rate at that time equals today's 90-day forward rate? Round your answer to the nearest cent.
$ ___
c. If the exchange rate for the Australian dollar is 1.31 to $1 in 90 days, how much will Vintnor have to…
Arvin Australian Imports has agreed to purchase 15,000 cases of Australian wine for 5 million Australian dollars at today's spot rate. The firm's financial manager, Sarah Vintnor, has noted the following current spot and forward rates:
U.S. Dollar/Australian Dollar
Australian Dollar/U.S. Dollar
Spot
0.7259
1.3776
30-day forward
0.7264
1.3767
90-day forward
0.7279
1.3738
180-day forward
0.7289
1.3719
On the same day, Vintnor agrees to purchase 15,000 more cases of wine in 3 months at the same price of 5 million Australian dollars.
What is the price of the wine in U.S. dollars if it is purchased at today's spot rate? Round your answer to the nearest cent.
$
What is the cost in U.S. dollars of the second 15,000 cases if payment is made in 90 days and the spot rate at that time equals today's 90-day forward rate? Round your answer to the nearest cent.
$
If the exchange rate for the Australian dollar is 1.29 to $1 in 90 days, how much will Vintnor have to pay for…
Finance
Chapter 19 Solutions
Fundamentals of Financial Management (MindTap Course List)
Ch. 19 - Why do U.S. corporations build manufacturing...Ch. 19 - Prob. 2QCh. 19 - Prob. 3QCh. 19 - Should firms require higher rates of return on...Ch. 19 - Does interest rate parity imply that interest...Ch. 19 - Prob. 6QCh. 19 - Prob. 7QCh. 19 - Prob. 1PCh. 19 - Prob. 2PCh. 19 - Prob. 3P
Ch. 19 - Prob. 4PCh. 19 - Prob. 5PCh. 19 - Prob. 6PCh. 19 - CURRENCY APPRECIATION Suppose that 1 Danish krone...Ch. 19 - Prob. 8PCh. 19 - Prob. 9PCh. 19 - Prob. 10PCh. 19 - Prob. 11PCh. 19 - INTEREST RATE PARITY Assume that interest rate...Ch. 19 - Prob. 13PCh. 19 - EXCHANGE GAINS AND LOSSES You are the vice...Ch. 19 - Prob. 15PCh. 19 - Prob. 16PCh. 19 - FOREIGN CAPITAL BUDGETING Solitaire Machinery is a...Ch. 19 - Prob. 19IC
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