Textbook Problem

SPOT AND FORWARD RATES Anderson Australian Imports has agreed to purchase 15,000 cases of Australian wine for 4 million Australian dollars at today’s spot rate. The firm’s financial manager, Linda Wilson, has noted the following current spot and forward rates:

	U.S. Dollar/ Australian Dollar	Australian Dollar/ U.S. Dollar
Spot	0.9426	1.0609
30-day forward	0.9404	1.0634
90-day forward	0.9365	1.0678
180-day forward	0.9309	1.0742

On the same day, Wilson agrees to purchase 15,000 more cases of wine in 3 months at the same price of 4 million Australian dollars.

1. a. What is the price of the wine in U.S. dollars if it is purchased at today’s spot rate?
2. b. What is the cost in U.S. dollars of the second 15,000 cases if payment is made in 90 days and the spot rate at that time equals today's 90-day forward rate?

   c. If the exchange rate for the Australian dollar is 1.03 to $1 in 90 days, how much will Wilson have to pay for the wine (in. U.S. dollars)?