You are a CFO of Tattoos and Piercings, International, the US based corporation. You are planning a major expansion into the Australian market. Your company needs 2,000,000 AUD for expansion expenses in 60days.
Currently:
Quoted Price
Australian Dollar AUD: USD spot USD 0.9000
Australian Dollar AUD: USD 60 day forward USD 0.8950
An Australian bank pay for short term deposit in Australian dollars 0.5% for 60 days or, you can use your corporate cash currently denominated in American Dollars that is on deposit with Citibank at 4% APR compounded daily. You do not want to take any risks with the currency fluctuation. What are your two choices? Present your calculations clearly to substantiate your choice with numbers.