A Canadian importer has ordered $2,000,000 US worth of customized

Microsoft Offiffiffice 365 to be delivered in six months. The current spot

exchange rate is $1.50 CAD = $1.00 USD. However, the importer fears

that the Canadian dollar (CAD) will depreciate to $1.55 CAD = $1.00

USD in the next 6 months. As a result, the importer purchases $1,000,000

USD at today’s prevailing six-month forward rate of $1.52 CAD = $1.00

USD. What is the savings to the importer from his dealings in the forward

market(assume his fears comes true in the next 6 months)?

(a) $60,000 USD.

(b) $60,000 CAD.

(c) $100,000 CAD.

(d) $40,000 CAD.

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