Today is 1 August and a quick check of the newspaper shows that the relevant exchange rate is AUD 1.00 = EUR 0.6882. Your budget suggests EUR10,000 will be required to guarantee the success of your vacation. Naturally, you fear that the Australian Dollar might weaken between now and December, thus impacting on the quality of your vacation. There are a number of courses of action available to you and we will explore the outcomes of each. a) Assume that you do nothing. In December, the day before your departure, you visit the bank and ask to buy EUR10,000. Assume that the spot exchange rate then is AUD 1.00 = EUR 0.6000. How much will the EUR10,000 cost you?

Today is 1 August and a quick check of the newspaper shows that the relevant exchange rate is AUD 1.00 = EUR 0.6882. Your budget suggests EUR10,000 will be required to guarantee the success of your vacation. Naturally, you fear that the Australian Dollar might weaken between now and December, thus impacting on the quality of your vacation. There are a number of courses of action available to you and we will explore the outcomes of each. a) Assume that you do nothing. In December, the day before your departure, you visit the bank and ask to buy EUR10,000. Assume that the spot exchange rate then is AUD 1.00 = EUR 0.6000. How much will the EUR10,000 cost you?

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter4: Exchange Rate Determination

Section: Chapter Questions

Problem 23QA

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