Question
On 1 November 2021, Harvest Ltd enters a contract to buy inventory from an overseas supplier, with the inventory to be delivered in six months
On 1 November 2021, Harvest Ltd enters a contract to buy inventory from an overseas supplier, with the inventory to be delivered in six months time. A sum of US$1 000 000 is payable on delivery of the inventory.
Harvest Ltd does not want to be exposed to potential losses associated with changes in the exchange rate. As a result, harvest Ltd takes out a forward rate contract with East Bank to purchase US$1 000 000 in six months time at an exchange rate of A$1.00 = US$0.70.
Required: Explain who now bears the risks associated with changes in the exchange rate, and calculate how much harvest Ltd will ultimately pay for the inventory.
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Process Safety Management Risk Management Planning Auditing Handbook A Checklist Approach
Authors: David Einolf, Luverna Menghini
1st Edition
086587686X, 978-0865876866
