That Italian antique was priced at 3 million lire which,fortunately,does not have to be paid for 3 months.The lira has a spot exchange rate of L2,000/$ but is trading 3 months forward at a 5% discount.If you contract ahead now,how many dollars will the antique cost?

Question

Quizplus · Accepted Answer

The forward rate is L2,000 x (1 - 5%) = L1,900/$. The antique will cost 3,000,000/1,900 = $1,578.95.

That Italian Antique Was Priced at 3 Million Lire Which,fortunately,does