Mr Smith wants to import goods from Japan and he banks with HBC Bank. The total cost of his import equals USD 250 000. Derrick has enquired from his bank the spot rate, 3-month forward rate and 6- month forward rate for purchasing dollars for his import payment. HBC Bank has provided him with the following rates: SPOT RATE: 14.98 3 MONTH FORWARD RATE: 15.18 6 MONTH FORWARD RATE: 15.38

3.1 Calculate the cost of Smiths import order based on the spot rate quoted by HBC Bank (4 marks)

3.2 Calculate the cost of Smiths import order based on the 3 month forward rate quoted by HBC Bank (4 marks)

3.3 Calculate the cost of Smiths import order based on the 6 month forward rate quoted by HBC Bank (4 marks)

3.4 Assume that Smiths will pay 40% of the total amount immediately to his supplier and the remaining 60% will be split with the first 40% due in 3 months and the next 20% due in 6 months time. Calculate the cost of Smiths import (4 marks)

3.5 The supplier has offered him a 10% discount on the 25% due in 6 months (from the previous question (4)) if he settles the balance in 3 months time. Calculate the cost of Smiths import (4 marks)