An importer enters into a 60 day forward exchange rate for converting dollars into yuan.The spot exchange rate is 5.28 yuan for 1 dollar.The forward exchange rate is 5.27 yuan for 1 dollar.What is the difference in the amount the importer receives using the forward exchange rate and the spot exchange rate.

Question

Quizplus · Accepted Answer

To calculate the difference, we need to compare the amount of yuan received using the forward rate and the spot rate. Let's assume the importer wants to convert $100,000 into yuan.

Using the spot exchange rate, the importer will receive:

$100,000 x 5.28 yuan/$ = 528,000 yuan

Using the forward exchange rate, the importer will receive:

$100,000 x 5.27 yuan/$ = 527,000 yuan

The difference between the two amounts is:

528,000 yuan - 527,000 yuan = 1,000 yuan or $190.84 (using the current exchange rate of 1 USD = 6.0159 CNY).

Therefore, the answer is C) 500 yuan (or $190.84).

An Importer Enters into a 60 Day Forward Exchange Rate