Sept 1.3634 C$/US$
Oct 1.3221 C$/US$
In September 2003, a U.S. retailer wanted to purchase canola oil from a Canadian farm. At that time in Canada, one barrel of canola oil cost C$2.00 (two Canadian dollars). The Canadian farm promised to deliver the canola oil in October 2003. Given the information above, which of the following statements is true?
Problem 1: If the two businesses negotiated a forward exchange rate in September, the risk of a change in exchange rates would be eliminated.
Problem 2: If the two businesses exchanged at the spot exchange rate, the Canadian canola oil was relatively less expensive for U.S. retailers in October than in September.
Problem 3: If the two businesses exchanged at the spot exchange rate, the Canadian farm received more than two Canadian dollars per barrel in October.
Problem 4: The Canadian canola oil is the same price for U.S. retailers regardless of whether the two businesses used the spot or forward rate.