Question

If the spot rate was $1.0130/C$ and the 90-day forward rate was $1.0240/C$, how much more (in U.S. dollars) would you receive by selling C$1,059,000 at the forward rate than at the spot rate? Additional revenue $______________

Answer 1

Solution:

As per the information given in the question we have

Spot rate of 1 C$ = $ 1.0130

90 day Forward rate of 1 C$ = $ 1.0240

Amount receivable = C$ 1,059,000

At spot rate amount received on sale = Amount receivable * Spot rate

= C$ 1,059,000 * $ 1.0130

= $ 1,072,767.00

At Forward rate amount received on sale = = Amount receivable * Forward rate

= C$ 1,059,000 * $ 1.0240

= $ 1,084,416.00

The Additional revenue = $ 1,084,416.00 - $ 1,072,767.00 = $ 11,649.00

Thus the additional revenue received on selling the 1,059,000 C$ at the forward rate = $ 11,649.00