Determining the spot rate on the euro

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A U.S. importer has purchased leather wallets from a seller in Italy. The payment terms of the transaction are net 60 days. The currency of the transaction is Eurodollars. At the time of shipment (October 11), the spot rate on the Euro is $1.13; the sixty day future rate is $1.20. The importer enters into an option to buy Euros at $1.21. On December 11 (when payment is due), the spot rate on the Euro is $1.25. It should exercise the option.

Reference no: EM133086625

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