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You are the financial manager of Lenovo and have received the following spot and interest rate bid-ask quotes from Barclays: Spot rate: USD0.7117-56/AUD Interest
You are the financial manager of Lenovo and have received the following spot and interest rate bid-ask quotes from Barclays: Spot rate: USD0.7117-56/AUD Interest Rate (US): 2.10% - 2.60% Interest Rate (Aus): 6.80% - 7.00% Assume that Lenovo has a payable in AUD in one year and wishes to lock in an amount of USD that it will cost to cover this obligation. Rather than use Barclays's forward ask rate, Lenovo instead wishes to create a portfolio using the using the spot and money market rates provided by Barclays to achieve the same thing. What is the effective one-year forward ask price that Lenovo is able to achieve to purchase the AUD needed to cover their obligation (by spending USD)?
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