Question

In: Accounting

Gotohell buys and sells regularly with customers worldwide. Its home currency is the dollar. The firm...

Gotohell buys and sells regularly with customers worldwide. Its home currency is the dollar. The firm expects to receive €1.2 million in 6 months’ time from a customer abroad.

Current exchange rates in the home country of Gotohell are:

Exchange rate : Euros Per dollar

Spot : 4.1780-4.2080

6-month forward : 4.2302- 4.2606

12-month forward : 4.2825-4.3132

Required:

a) Calculate the rate of forward discount of the euro on the 6-month forward exchange rate both for buying and selling rate.

b) If the interest rate in the home country of Gotohell is 4% per year, calculate the implied annual interest rate in the foreign customer’s country, using the mid-spot and the mid-twelve-month forward exchange rate.

Solutions

Expert Solution

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Gotohell buys and sells regularly with customers worldwide. Its home currency is the dollar. The firm...
Gotohell buys and sells regularly with customers worldwide. Its home currency is the dollar. The firm expects to receive €1.2 million in 6 months’ time from a customer abroad. Current exchange rates in the home country of Gotohell are: Exchange rate : Euros Per dollar Spot : 4.1780-4.2080 6-month forward : 4.2302- 4.2606 12-month forward : 4.2825-4.3132 Required: a) Calculate the rate of forward discount of the euro on the 6-month forward exchange rate both for buying and selling rate....
A grocery store buys Italian gelato from different suppliers and sells the desserts to its customers...
A grocery store buys Italian gelato from different suppliers and sells the desserts to its customers for $5 per pint. In September, the following purchases and sales occurred. You are to find the COGS, ending inventory and Gross Margin using FIFO and LIFO. September 2, purchase 30 pints at $2.50 each September 6, purchase 20 pints at $3 each September 20, purchase 25 pints at $4 each September 5-8, sell 10 pints to customers September 9-19, sell 20 pints September...
Why does most interbank currency trading worldwide involve the U.S. dollar? Explain in detail and provide...
Why does most interbank currency trading worldwide involve the U.S. dollar? Explain in detail and provide an example. How have the current financial problems in the U.S. affected interbank trading, if any?
A firm currently sells its product with a 2% discount to customers who pay by cash...
A firm currently sells its product with a 2% discount to customers who pay by cash or credit card when they purchase one of the firm's products; otherwise, the full price is due within 30 days. Forty percent (40%) of customers take advantage of the discount. The firm plans to drop the discount so the new terms will simply be net 30. In doing so it expects to sell 100 fewer units per month and all customers to pay at...
Sampling Distribution of Proportions A restaurant chain regularly surveys its customers. On the basis of these...
Sampling Distribution of Proportions A restaurant chain regularly surveys its customers. On the basis of these surveys, the management of the chain claims that 75% of its customers rate the food as excellent. A consumer testing service wants to examine this claim. They take a simple random sample of 600 customers and ask them each to rate the food. Assume that the restaurant chain’s claim is true (i.e. that the true proportion is indeed 0.75). a) assuming that the chain’s...
Assume the country of Sluban ties its currency (the slu) to the dollar and the exchange...
Assume the country of Sluban ties its currency (the slu) to the dollar and the exchange rate will remain fixed. Sluban has frequent trade with countries in the eurozone and the United States. All traded products can easily be produced by all the countries, and the demand for these products in any country is very sen- sitive to the price because consumers can shift to wherever the products are relatively cheap. Assume that the euro depreciates substantially against the dollar...
1. A U.S. company sells to customers in Canada and buys from suppliers in Singapore. At...
1. A U.S. company sells to customers in Canada and buys from suppliers in Singapore. At December 31, 2019, the company’s year-end, the following items are reported on its balance sheet: Accounts receivable (C$2,500,000)..…………………… $2,125,000 Accounts payable(S$1,400,000)………………………….. 1,061,200 On January 22, 2020, when the spot rate is $0.845/C$, the company collects C$1,000,000 from customers. It collects the remaining C$1,500,000 on February 16, 2020, when the spot rate is $0.856. On February 23, 2020, when the spot rate is $0.762, the...
Lilliput, a one-product mail-order firm, buys its product for $55 per unit and sells it for...
Lilliput, a one-product mail-order firm, buys its product for $55 per unit and sells it for $153 per unit. The sales staff receives a 10% commission on the sale of each unit. Its December income statement follows.    LILLIPUT COMPANY Income Statement For The Month Ended December 31, 2011   Sales $ 1,530,000   Cost of goods sold 550,000      Gross profit 980,000   Expenses      Sales commissions (10%) 153,000      Advertising 246,000      Store rent 26,300        Administrative salaries 51,500      Depreciation 61,500      Other expenses 14,300   ...
A firm sells its product to two groups of customers. Demand from group 1 is Q1...
A firm sells its product to two groups of customers. Demand from group 1 is Q1 = 100, 000− 5,000P and demand from group 2 is Q2 = 140,000 − 10,000P. a) Find the total demand that the firm faces for its product. Explain it first using pictures, and then do the algebra. Write your answer of the total demand as quantity as a function of price. (Hint: draw pictures. Then add the two demands horizontally; that is, at each...
A firm sells a currency future contract, and then decides before the settlement date that it...
A firm sells a currency future contract, and then decides before the settlement date that it no longer wants to maintain such a position. It can close out its position by: A. Purchasing a put option contract in the same currency. B. Buying a futures contract with a different settlement date. C. Buying an identical futures contract. D. Selling a futures contract for a different amount of currency. E. Selling an identical futures contract.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT