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The Current Spot Rate Is $US0

question 36

Multiple Choice

The current spot rate is $US0.8543/$A. The one-year forward rate is $US0.8475/$A. A U.S. exporter denominates its exports to Australia in $A and expects to receive $A600,000 in one year. What is the value of these exports in one year in $US given that the firm executes a forward hedge?


Definitions:

Fundamental

Fundamental refers to serving as an essential component or basis for something, being of central importance.

Defence Mechanism

Psychological strategies brought into play by the unconscious mind to manipulate, deny, or distort reality in order to defend against feelings of anxiety and unacceptable impulses.

Displacement

A psychological defense mechanism where an individual shifts emotions from one object or idea to another, often less threatening, target.

Projection

A defense mechanism where an individual ascribes their own unwanted thoughts, feelings, or motives to another person.

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