What is no-arbitrage two-year forward exchange rate

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Reference no: EM132044374

1. A company's free cash flow forecasts are as follows: Year 1 = negative $10 million Year 2 $20 million. After the second year, free cash flow will grow at a constant rate of 4% per year into the foreseeable future. If the overall cost of capital is 14%, calculate current value of operations?

2. You have the following market data.

Continuously compounded two-year risk-free interest rates in Australia and the U.S. are 5.25% and 4.03%, respectively, per annum.

Spot exchange rate between the Australian dollar and the U.S. dollar is $0.985 per Australian dollar.

What is the no-arbitrage two-year forward exchange rate (expressed in U.S. dollars)?

Reference no: EM132044374

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