Assume IBM enters into a forward contract to purchase 200,000 euros at a rate of $1.90/euro one year from today. If the spot exchange rate is $2/euro one year later, what is the dollar amount that IBM must pay to receive the euros?

Question

Quizplus · Accepted Answer

C) Dollar amount = euros purchased × exchange rate in dollars/euro
Dollar amount = 200,000 × 1.9 = $380,000

Assume IBM Enters into a Forward Contract to Purchase 200,000