Which of the payment dates would be more suitable

Reference no: EM131965543

Question: It is Dec 2016. An Australian firm owes Rs35,000,000 to an Indian firm, to be repaid within the next two months. To keep things simplified, assume that the repayment date can be either Jan 31, 2017 or Feb 28, 2017. Suppose the following information are available regarding the expected exchange rates:

Expected spot rate on Jan 31, 2017 ($/A$): $0.74/A$
Expected spot rate on Jan 31, 2017 (Rs/$): Rs68.54/$

Expected spot rate on Feb 28, 2017 ($/A$): $0.73/A$
Expected spot rate on Feb 28, 2017 (Rs/$): Rs70.01/$

Which of these payment dates would be more suitable for the Australian firm, assuming the firm would prefer that date that would require less Australian Dollar cash outlay at the time of repayment?

Reference no: EM131965543

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