Question
As the financial analyst of clear ltd., a Canadian company selling microchips to a sole buyer from US. you have just concluded the sale of
As the financial analyst of clear ltd., a Canadian company selling microchips to a sole buyer from US. you have just concluded the sale of goods worth 1,000,000 dollar today, with the option for the buyer either pay today or in 6 months. you are provided with the following spot and forward rates between the Canadian dollar and US dollar
Spot rate: 0.9325 CAD/$
3 months forward rate: 0.8968 CAD/$
6 months forward rate: 0.8395 CAD/$
based on the spot and forward rates, do you expect the Canadian dollar to weaken or strengthen against the us dollar?
will you recommend the transaction to be settled today or in 6 months? explain your answer.
Is the us dollar trading at a premium or discount, assuming you use the 6-month forward rate and Canada is the home country? explain your answer.
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