The AUD/USD spot rate is 0.7227/31. The 11-month FX swap rate is 49/48. What is the FEC rate for a corporate customer who needs to buy USD versus AUD in 11 months? a. 0.7177 b. 0.7178 c. 0.7183 d. 0.7276
Question
The AUD/USD spot rate is 0.7227/31. The 11-month FX swap rate is 49/48. What is the FEC rate for a corporate customer who needs to buy USD versus AUD in 11 months?
a. 0.7177
b. 0.7178
c. 0.7183
d. 0.7276
Solution
To calculate the FEC rate, we need to subtract the 11-month FX swap rate from the AUD/USD spot rate.
The spot rate is 0.7227/31. This means that you can buy USD at 0.7231 AUD and sell USD at 0.7227 AUD.
The 11-month FX swap rate is 49/48. This means that if you are buying USD (and therefore selling AUD), you would use the higher rate of 0.0049.
So, to calculate the FEC rate, you would subtract the swap rate from the spot rate:
0.7231 (spot rate) - 0.0049 (swap rate) = 0.7182
However, none of the options provided exactly match this calculation. The closest option is:
c. 0.7183
Please note that the exact FEC rate may vary slightly due to rounding or other factors.
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