The following is the interest rate in US and Jordan as publish by the Arab Bank

Int Rate 6 month 1 Year

Jord 3% 9%

US 6% 7%

spot rate is 0.75J/$.

AL Huda is a Jordanien company imports machine form US. Al-Huda want to buy machines worth $250,000 from the US in 6 months. Usually It takes another 6 month for the machine to arrive Jordan. The company intend to borrow $250,000 form Arab Bank @8% for 6 month- until they manage to sell the machine to a Jordanian customers. The company's customers usually pay in Jordanian Dinars .. The company hiredYou asa financial consultant.

1.What is the value of the transaction in Jordanian Dinar in 6 month.

2.How much money the company will have to return to the Arab bank in one year- Give the value in Jordanian Dinars

3.How much would be ALHudatotallosses or profit ( in JD)

The company hiredYou asa financial consultant to manage the currency risk. You expect that the US' rate will increase by 500 base point on 6 month rate. You convince the company to sign a forward contract with The Arab Bank.

1.What kind of forward exchange rate should the company sign with the Arab bank. Which currency would you choose to be long and which currency short. Explain why

2.Suppose when you called the Arab bank, they told you that the 6 month forward rate is 0.74J/$. If the rate is wrong, explain how would you take advantages of this mistake? Explain How it works- draw a clear draft.

3.How much would be your profit/Loss given that your expectation materialized- the US gov increase the rate by 500 point.