Currency Forward Amount Calculation

Easy Forward Pricing And Valuation Currency Forwards

A company based in the United States has a receivable of €1,000,000 due in six months. The current spot exchange rate is 1.15 USD/EUR, and the six-month forward rate is 1.12 USD/EUR. The company wants to lock in the exchange rate for its receivable to ensure it knows exactly how much it will receive in USD when the payment is made.

What is the amount the company will receive in USD if it enters into a six-month currency forward contract at the forward rate?

€1,000,000 * 1.15 = $1,150,000

€1,000,000 * 1.12 = $1,120,000

€1,000,000 * 1.20 = $1,200,000

Hint

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