Your U.S.-based company is selling parts to a company in Chile and the company will pay you 9.8 million pesos in 3 months. The current exchange rate is 490 pesos/US$. If the exchange rate at the time of payment is 510 pesos/US$

Question

Quizplus · Accepted Answer

When the exchange rate changes from 490 pesos/US$ to 510 pesos/US$, it means you get more pesos for each dollar. However, since you are receiving a fixed amount of pesos, when you convert these pesos back to dollars at the higher exchange rate, you will end up with fewer dollars than initially anticipated, thus earning less profit.

Your US-Based Company Is Selling Parts to a Company in Chile