Graylon, Inc., based in Washington, exports products to a German firm and will receive payment of €200,000 in three months. On June 1, the spot rate of the euro was $1.12, and the 3-month forward rate was $1.10. On June 1, Graylon negotiated a forward contract with a bank to sell €200,000 forward in three months. The spot rate of the euro on September 1 is $1.15. Graylon will receive $____ for the euros.
A) 224,000
B) 220,000
C) 200,000
D) 230,000

Question

​Graylon, Inc., based in Washington, exports products to a German firm and will receive payment of €200,000 in three months. On June 1, the spot rate of the euro was $1.12, and the 3-month forward rate was $1.10. On June 1, Graylon negotiated a forward contract with a bank to sell €200,000 forward in three months. The spot rate of the euro on September 1 is $1.15. Graylon will receive $____ for the euros.
A) ​224,000
B) ​220,000
C) ​200,000
D) ​230,000

Quizplus · Accepted Answer

Graylon will receive $220,000 for the euros because they negotiated a forward contract to sell €200,000 at a rate of $1.10 per euro.

​Graylon, Inc

Graylon, Inc