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A Canadian importer has ordered US$1,000,000 worth of software to be delivered in six months from USA. The current spot exchange rate is C$1.50 =
A Canadian importer has ordered US$1,000,000 worth of software to be delivered in six months from USA. The current spot exchange rate is C$1.50 = US$1.00 However, the importer fears that the Canadian dollar will depreciate to C$1.55 = US$1.00 in the next 6 months. As a result, the importer purchases US$1,000,000 at today's prevailing six-month forward rate of C$1.52 = US$1.00 . What is the potential savings to the importer from his dealings in the forward market?
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