The dollar per euro spot rate is 1.2 when an importer of French wines places an order.6 months later,when she takes delivery,the spot rate is 1.3 dollars per euro.If her original invoice was for 30,000 euro,what is her gain or loss due to exchange rate risk?

Question

Quizplus · Accepted Answer

When the importer placed the order, she agreed to pay 1.2 dollars per euro, so the cost in dollars was 30,000 x 1.2 = $36,000.
However, when she took delivery, the exchange rate had moved against her, and the cost in dollars was now 30,000 x 1.3 = $39,000.
Therefore, the importer has incurred a loss of $39,000 - $36,000 = $3,000. Hence, the answer is option B.

The Dollar Per Euro Spot Rate Is 1