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A company agrees to pay 10,000,000 for a shipment from Japan. At the time the purchase order is placed the exchange rate is 168/US$. At the time of payment the exchange rate is 163/US$. What is the net effect on the dollar cost of the shipment if the transaction has NOT been hedged?
Suggested Answer: B
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12 comments · newest first
TE
Teresita
3 days ago
I lean towards option B.
CA
Carma
8 days ago
Definitely! I feel confused about the rates.
CH
Charlena
13 days ago
I think it's tricky.
JU
Jules
18 days ago
So, that's a decrease of $1,825, right?
BE
Benton
23 days ago
Totally agree, it makes sense that it would decrease!
HO
Howard
28 days ago
I doubt it's a decrease. Sounds off to me.
AB
Abel
1 month ago
Wait, so the cost actually goes down with the better exchange rate?
VI
Vincenza
1 month ago
The initial cost was 10,000,000 yen at 168, so that's about $59,524.
NA
Natalie
1 month ago
I think we need to calculate the cost in dollars at both rates and see the difference. I just hope I remember the right formula!
AM
Amie
2 months ago
I feel like the answer might be a decrease since the exchange rate went down, but I can't recall the exact numbers we used in class.
VE
Veronica
2 months ago
This seems similar to a practice question we did on currency fluctuations. I think we need to find the dollar amount based on the exchange rates.
PA
Pa
2 months ago
I remember something about how exchange rates can affect costs, but I'm not sure how to calculate the difference here.