Case Study 5 A Toronto based exporter have exported a shipment of sulphuric acid to New York on 1 st August, 2022. Invoice value is USD 750,000 and the exchange rate on the shipment date is USD 1 = CAD 1.3529. Payment terms are 120 days open account. However importer paid an advance of USD 250,000 on 10th July, 2022 when exchange rate was USD 1 = CAD 1.3576. Shipper was worried about the continuing free downfall of CAD and approached TD Bank to provide a competent financial solution, which has offered a 120 days forward rate of CAD 1.3648 on a forward premium of CAD 2,500. Indeed the exchange rate on 1st December, 2022 turned out to be CAD 1.3514 for one USD. Question 1 In the above case, which CAD rate can be referred to as spot rate for one USD? (A) 1.3648 (B) 1.3576 (C) 1.3529 (D) 1.3914 Question 2 How does the exchange rates gets decided? ______________________________ Question 3 In the above case study, which rate can be referred to as forward rate? (A) 1.3914 (B) 1.3576 (C) 1.3529 (D) 1.3648 Question 4 Did the exporter made the right decision to enter into a forward exchange agreement with TD bank? (A) True (B) False Question 5 How much money did the shipper made or lost due to forward rate agreement?

Question 6 If the exchange rate turns out to be CAD 1.3209 for one USD on 1 st December 2022, did the exporter made the right decision to enter into an agreement with TD bank? (A) True (B) False Question 7 If the exchange rate turns out to be CAD 1.3209 for one USD on 1 st December 2022, how much money did the shipper made or lost due to forward rate agreement? Question 8 If the Canadian dollar was declining on a constant basis and exporting company is worried about freefall of CAD. Is their worries justified? (A) Yes (B) No