Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Suppose that Retrojo Inc. is a U . S . based MNC that will need to purchase F$ 1 . 8 0 million ( Fijian

Suppose that Retrojo Inc. is a U.S. based MNC that will need to purchase F$1.80 million (Fijian dollars, F$) worth of imports from Fiji in 90 days. Currently, the spot rate for the Fijian dollar is $0.52 per F$.
Suppose that Retrojo negotiates a forward contract with a bank, which commits it to purchasing Fijian dollars at F$1,800,000.00 at $0.52 per Fijian dollar in 90 days. Thus, Retrojo knows with certainty that it will need F$1,800,000.00\times $0.52 per Fijian dollars=$936,000.00 for this exchange.
If the Fijian dollar depreciates over this time period, to $0.37 per Fijian dollar, then only _____(U.S. dollars) would be needed to exchange for the required F$1,800,000.00.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The 30 Minute Stock Trader

Authors: Laurens Bensdorp

1st Edition

1619615738, 978-1619615731

More Books

Students also viewed these Finance questions