Consider a U.S. importer desiring to purchase merchandise from a Dutch exporter invoiced in euros, at a cost of €160,000. The U.S. importer will contact his U.S. bank (where of course he has an account denominated in U.S. dollars) and inquire about the exchange rate, which the bank quotes as €0.6250/$1.00. The importer accepts this price, so his bank will proceed to ____________ the importer's account in the amount of ____________.

Question

Quizplus · Accepted Answer

The importer's U.S. bank will debit the importer's account in dollars, based on the exchange rate of €0.6250/$1.00. Therefore, the calculation would be €160,000 x $0.6250 = $100,000, which would be the amount debited from the importer's account in dollars, and is therefore represented by choice A.