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New York Co. has payables of 10 million Australian dollars (AUD) in 1 year. New York Co plans to hedge its exposure with a fo

Calculate the amount of US dollars that NY Co. will need in 1 year to make its payment.

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Answer #1

SPOT RATE

1 AUD = 0.60 $

1+ Nominal RateinU SA Forward Rate = Spot Rate * ( 1+ Nominal Ratein Australia

Forward Rate = 0.60 * 1 +0.04. 1 +0.10

Forward Rate = 0.56727$ / AUD

1 AUD = 0.56727 $

10 Mn AUD = 10 Mn * 0.56727 = 5.6727 Mn $

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