Implications of IRP. Assume that interest rate parity exists. You expect that the 1-year nominal interest rate

Question:

Implications of IRP. Assume that interest rate parity exists. You expect that the 1-year nominal interest rate in the United States is 7 percent, while the 1-

year nominal interest rate in Australia is 11 percent.

The spot rate of the Australian dollar is $.60. You will need 10 million Australian dollars in 1 year. Today, you purchase a 1-year forward contract in Australian dollars. How many U.S. dollars will you need in 1 year to fulfill your forward contract?

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