Determine the profit or loss to be made by Wazalendo Company on the import-export business assuming that the company arranges to cover the transactions in the forward market.
Determine the profit or loss to be made by Wazalendo Company on the import-export business assuming that the company arranges to cover the transactions in the forward market.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![IIllustration One
Wazalendo Company is a Tanzanian company with exports and imports trade with the United Kingdom [UK]
and the United States of America [USA]. The following transactions, in the currency specified, are due within
the next six months:
• Purchase of goods from UK, cash payment due in three months £15,500
• Sale of goods purchased from UK to a USA customer, cash receipts due in 6 months US$ 29,000
• Purchase of goods from USA, cash payment due in three months US$ 150,000
• Sale of goods purchased from USA to a UK customer, cash receipts due in 6 months £75,000
The spot and forward exchange rates are as follows:
TZS/UK £
TZS/US$
Spot
2,600-2,700
1,350-1,360
Three months forward 2,750-2,800 1,400-1,450
Six months forward 2,850-2,900 1,550-1,600
Required:
Determine the profit or loss to be made by Wazalendo Company on the import-export business assuming that
the company arranges to cover the transactions in the forward market.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffd4524f9-6be7-4a96-8a6a-efcb62d2dc1c%2F045c4136-99e6-4439-aa21-f3ee96b02773%2Fdsiq9z9_processed.jpeg&w=3840&q=75)
Transcribed Image Text:IIllustration One
Wazalendo Company is a Tanzanian company with exports and imports trade with the United Kingdom [UK]
and the United States of America [USA]. The following transactions, in the currency specified, are due within
the next six months:
• Purchase of goods from UK, cash payment due in three months £15,500
• Sale of goods purchased from UK to a USA customer, cash receipts due in 6 months US$ 29,000
• Purchase of goods from USA, cash payment due in three months US$ 150,000
• Sale of goods purchased from USA to a UK customer, cash receipts due in 6 months £75,000
The spot and forward exchange rates are as follows:
TZS/UK £
TZS/US$
Spot
2,600-2,700
1,350-1,360
Three months forward 2,750-2,800 1,400-1,450
Six months forward 2,850-2,900 1,550-1,600
Required:
Determine the profit or loss to be made by Wazalendo Company on the import-export business assuming that
the company arranges to cover the transactions in the forward market.
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