Solved: How many us dollars will need for forward contract, Financial Management

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How many us dollars will need for forward contract

Response to the following problem:

Assume that interest rate parity exists. The 1-year nominal interest rate in the United States is 7 percent, while the 1-year nominal interest rate in Australia is 11 percent. The spot rate of the Australian dollar is $.60. Today, you purchase a 1-year forward contract on 10 million Australian dollars. How many U.S. dollars will you need in 1 year to fulfill your forward contract?

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Financial Management: How many us dollars will need for forward contract

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