Exchange rate between dollar and euro decreases

Assignment Help Operation Management

Reference no: EM131788889

Suppose a U.S. company contracted to sell 100,000 units of a product to a French company at a unit sales price of €40 with delivery in 120 days and payment due on delivery. The nominal exchange rate between U.S. dollar and Euro is 1.18 $/€ on the contract signing date. The U.S. company has the option of using a 120-day forward contract to protect itself against an adverse change in the exchange rate. Based on the assessment of the financial markets, the 120-day forward contract can be purchased at a discount of 3%.

If the nominal exchange rate between U.S. dollar and Euro decreases to 1.10 $/€ on the delivery date, how much will the U.S. company receive in terms of U.S. dollar on the delivery date? Please provide at least one step of calculation for full credit.

If the U.S. company chooses to use the 120-day forward contact to protect against the foreign exchange risk, how much will the U.S. company receive in terms of U.S. dollar on the delivery date? Please provide the forward rate and at least one step of calculation for full credit.

Reference no: EM131788889

Questions Cloud

Look for in a good innovation product champion : What characteristics do you look for in a good innovation product champion?

Describe the structure and size of fictional hospital : Describe the structure and size of a fictional hospital or nursing home that has a board of directors and a formal committee structure.

Design the teams to provide the necessary services : You have just taken over the management of a rehabilitation center where the main clientele are those persons requiring rehabilitation services for post-hip.

Strategy making process and study of strategic management : Explain why the concept of competitive advantage is central to the strategy making process and the study of Strategic Management.

Exchange rate between dollar and euro decreases : If the nominal exchange rate between U.S. dollar and Euro decreases to 1.10 $/€ on the delivery date,

Leadership has been described from various perspectives : Leadership has been described from various perspectives and defined by different concepts.

Covenant of good faith and fair dealing : The “covenant of good faith and fair dealing” as related to employment-at-will implies that excellent performance over an extended period of time grants

Quality function deployment in creating new product : Describe the role of human factors in designing life cycle products and Give examples of the use of Quality Function Deployment (QFD) in creating a new product.

Modifying the lease and creating a capital lease : The letter stated that there was a secret written agreement with the lessor modifying the lease and creating a capital lease.

User Account

All Pages