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.
