Exchange Rate Risk A U.S.firm is expecting cash flows of 5 million Mexican pesos and 10 million Indian rupees.The current spot exchange rates are: $1 = 11.255 pesos and $1 = 44.864 rupees.If these cash flows are not received for one year and the expected spot rates at that time will be $1 = 10.080 pesos and $1 = 44.125 rupees,then what is the difference in dollars received that was caused by the delay?

Question

Quizplus · Accepted Answer

The difference in dollars due to the change in exchange rates is calculated by converting the expected cash flows at both the current and future rates and finding the difference. The firm will receive $444,444.44 more from pesos and $16,444.44 less from rupees, resulting in a net increase of $56,000.

Exchange Rate Risk a U