Boeing,Inc.sold an airplane to Singapore Airlines for SGD100 million Singapore dollars with terms of one-year payment.The current spot rate $0.25 per SGD.Boeing expects to exchange SGD100 million at next year's spot rate when payment is received.If the spot rate for the SGD declines to $0.24 one year from today,what is Boeing's potential transaction gain or loss?

Question

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At the current spot rate of $0.25 per SGD, Boeing would expect to receive $25 million (100 million SGD * $0.25/SGD). If the spot rate declines to $0.24, Boeing would receive $24 million (100 million SGD * $0.24/SGD) instead. This results in a transaction loss of $1 million ($25 million - $24 million).