A U.S. firm is expecting cash flows of 5 million Mexican pesos and 10 million Indian rupees. The current spot exchange rates are: $1 =11.255 pesos and $1 = 44.864 rupees. If these cash flows are not received for one year and the expected spot rates at that time will be $1 = 10.080 pesos and $1 = 44.125 rupees, then what is the difference in dollars received that was caused by the delay?

Question

Quizplus · Accepted Answer

The firm will receive $56,000 more due to the change in exchange rates. The peso appreciates, leading to more dollars received, while the rupee depreciates, leading to fewer dollars received. The net effect is an increase of $56,000.

A US Firm Is Expecting Cash Flows of 5 Million Mexican