A U.S.company that imports laptop computers from Japan knows that in 30 days it must pay yen to a Japanese supplier when a shipment arrives.The company will pay the Japanese supplier $\times$150,000 for each computer,and the current dollar/yen spot exchange rate is $1 = $\times$110.The importer knows she can sell the computers the day they arrive for $1,600 each.However,the importer will not have the funds to pay the Japanese supplier until the computers have been sold.The importer enters into a 30-day forward exchange transaction with a foreign exchange dealer at $1 = $\times$105.Which of the following will happen if the exchange rate after 30 days is $1 = $\times$90?

Question

Quizplus · Accepted Answer

Initially,the importer had estimated a profit of $236 per computer ($1,600 - $1,364).With the forward contract in place,the importer will have to pay no more than $1,429 per computer ($\times$150,000/105).The outcome will be a guaranteed profit of $171 ($1,600 - $1,429).

A UScompany That Imports Laptop Computers from Japan Knows That in in 30