If the spot rate for Candian dollars is 1.25 = 1 USD and the annual interest rate on fixed rate one year depostis of Canadian dollars is 2.5% and for US$ is 1.5%, what is the 9 month forward rate for one US dollar in terms of Canadian dollars?
Assuming the same interest rates, what is the 18- month forward rate for one Canadian dollar in USD?
Is this an indirect or a direct rate?
If the forward rate is an accurate predictor of exchange rates, in this case will the pound get stronger or weaker against the dollar? What does this indicate about the market's inflation expectations in the UK compared to the US?
On January 2nd 2017 Toyota expects to ship 25,000 SUVs from its plant in Canada to the US, which it will sell through US dealers on 270 day terms at $38,000 each. So Toyota will receive payment from its dealers on September 28th, 2017. Assuming Toyota needs to cover its expenses in Canada and thus wants to hedge its Canadian dollar exposure using a forward contract with a Canadian bank in the US, what is the minimum amount of Canadian dollars it should receive on September 28th, 2017 given the 9 month forward rate for one USD in terms on Canadian dollars that you calculated above? What are two other ways Toyota might hedge their pound/dollar exposure?