Question
A US firm exports parts to Canada for CAD 12,000,000 with receipt due from the Canadian firm in one year. The market condition is summarized
A US firm exports parts to Canada for CAD 12,000,000 with receipt due from the Canadian firm in one year. The market condition is summarized as follows:
Interest rate, US: 5.8% per annum
Interest rate, Canada: 5.2% per annum
The spot exchange rate: $.7752/CAD
The one-year forward rate: $.7634/CAD
The US firm is considering a forward hedge. Complete the following sentence.
With a forward contract, it would _______________, ________________, in _______.
Round to four decimal places in your calculations.
Choices are rounded to the nearest thousand.
A. None of the other answers are correct.
B. sell; USD 9,161,000; one year
C. invest; 9,302,000; today
D. borrow; CAD 11,407,000; today
E. buy; USD 9,161,000; one year
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