On 1 April an Australian exporter sells A$10m of coal to a New Zealand company. The importer

Question:

On 1 April an Australian exporter sells A$10m of coal to a New Zealand company. The importer is sent an invoice for NZ$11m payable in six months. The spot rate of exchange between the Australian and New Zealand dollars is NZ$1.1/A$.
Required
a. If the spot rate of exchange six months later is NZ$1.2/A$ what gain or loss will be made by the Australian exporter?
b. If the spot rate of exchange six months later is NZ$1.05/A$ what gain or loss will be made by the Australian exporter?
c. A six-month forward is available at NZ$1.09/A$. Show how risk can be reduced using the forward.
Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...