Question
Victoria Exports (Canada).A Canadian exporter, Victoria Exports, will be receiving six payments of 12,600, ranging from now to 12 months in the future. Since the
Victoria Exports (Canada).A Canadian exporter, Victoria Exports, will be receiving six payments of
12,600,
ranging from now to 12 months in the future. Since the company keeps cash balances in both Canadian dollars and U.S. dollars, it can choose which currency to exchange the euros for at the end of the various periods. Which currency appears to offer the better rates in the forward market?(Click on the
icon to import the table into a spreadsheet.)
| Period | Days Forward | C$/euro | US$/euro |
|
| spot | 1.3343 | 1.3236 | ||
| 1 month | 30 | 1.3366 | 1.3239 | |
| 2 months | 60 | 1.3393 | 1.3241 | |
| 3 months | 90 | 1.3419 | 1.3247 | |
| 6 months | 180 | 1.3441 | 1.3252 | |
| 12 months | 360 | 1.3467 | 1.3276 |
Calculate the forward premium, the Canadian dollar proceeds, and the difference from the spot rate proceeds in the C$/Euro forward market below:(Round the forward premium to three decimal places and the Canadian dollar amounts to the nearest cent.)
|
| Days |
| Forward Premium |
|
| C$ Proceeds of |
| Difference |
| Period | Forward | C$/euro | on the C$/euro |
|
| 12,600 |
| Over Spot |
| Spot | 0 | 1.3343 |
| C$ |
| C$ |
|
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Managerial Accounting Tools For Business Decision Making
Authors: Jerry J. Weygandt, Paul D. Kimmel, Ibrahim M. Aly, Donald E. Kieso
6th Canadian Edition
1119731828, 9781119731825
