In December 2005,the Spot Exchange Rate for the British Pound

question 6

Essay

In December 2005,the spot exchange rate for the British Pound was CND$1.7188/£ and the one-year forward rate was CND$1.8675/£.Suppose that at the same time Luther Industries entered into a contract to purchase goods with a price of £375,000 to be delivered in one year.Simultaneously Luther entered into a one-year forward contract to purchase £375,000.What is the amount of the payment in Canadian dollars that Luther Industries will have to make in one year to pay for their goods?

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Definitions:

Task Function

An activity directly related to the effective completion of a team’s work.

Harmonizing Conflict

The process of resolving disputes and disagreements in a way that satisfies all parties involved.

Group Behavior

The actions, interactions, and mechanisms of conduct among individuals within a group context.

Undisclosed Principal

A legal term for a situation where an agent acts on behalf of a principal whose identity is kept secret from the third party at the time of the agreement.