Question
Your name is Lara and you are the finance Director of General Electric (GE). You need, on behalf of GE, to buy 22 mio Australian
Your name is Lara and you are the finance Director of General Electric (GE). You need, on behalf of GE, to buy 22 mio Australian dollars (AUD) and sell British pounds (GBP) for delivery 3 months from now (the purchase of AUD is in connection with payment to an Australian mining company for iron ore).
You telephone three banks (Citibank, Bank of America, and JP Morgan) ) and ask them for 3 months forward exchange rates for the number of Australian dollars per British pound. Their rates are:
Citibank AUD/GBP 1.8705 -- 1.8710 Bank of America AUD/GBP 1.8703 -- 1.8708 JP Morgan AUD/GBP 1.8706 -- 1.8711.
Q6: Assuming you trade in the forward contract, at what rate (expressed -- again -- as AUD/GBP) should you trade?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started