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An importer located in Haiti expects a shipment of goods from Brazil in 1 years' time. At that time, she will need to make a
An importer located in Haiti expects a shipment of goods from Brazil in 1 years' time. At that time, she will need to make a payment of 848,000 Brazilian Real to the exporter. Unfortunately, there is no foreign exchange option for Haitian GourdeBrazilian Real and the importer cannot readily find someone to take the other side of a forward contact. The importer observes that - The Brazilian Real is currently trading at .20 US dollars. - The Haitian Gourde is trading at .01 US dollars. - A bank in Brazil posts an annual interest rate of 6% on all deposits and loans. - A bank in Haiti posts an annual interest rate of 18% on all deposits and loans. Using the two banks and the current spot rates, the importer is assured of paying Haitian Gourde for her imports
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