Spot and Forward Rates

Boisjoly Watch Imports has agreed to purchase 14,000 Swiss watches for 1 million francs at today's spot rate. The firm's financial manager, James Desreumaux, has noted the following current spot and forward rates:

	U.S. Dollar/Swiss Franc	Swiss Franc/U.S. Dollar
Spot	1.6600	0.6024
30-day forward	1.6540	0.6046
90-day forward	1.6420	0.6090
180-day forward	1.6360	0.6112

On the same day, Desreumaux agrees to purchase 14,000 more watches in 3 months at the same price of 1 million Swiss francs.

1. What is the cost of the watches in U.S. dollars, if purchased at today's spot rate? Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest dollar.

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1. What is the cost in dollars of the second 14,000 batch if payment is made in 90 days and the spot rate at that time equals today's 90-day forward rate? Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest dollar.

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1. If the exchange rate is 0.50 Swiss francs per dollar in 90 days, how much will Desreumaux have to pay (in dollars) for the watches? Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest dollar.

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