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Hi , Good afternoon.
I have a question in regards to June 2013 . Here the net payment is $2.4m from kenduri.
The spot is 1.5398 – 1.5962 $/f. So bound is the base currency.
if we pay $2.4 , are we not supposed to use $1.5398 on forward contract. On exam answer
the rate used in 1.5962. could you please provide explanation.Thank you
The rates you have quoted are the spot rates.
You should be using the 3 month forward rates – 1.5996 to 1.6037 (because the transaction is in 3 months time). The rate the examiner has used for the forward contract in his answer is 1.5996 (not 1.5962) which is the correct rate.
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