Land Rover has full manufacturing costs of their Evoque crossover of £32,500. They sell the Evoque crossover in the UK with a 15% profit margin. Today the spot exchange rate is $1.3456/£ and Land Rover has committed to keeping the U.S. price based on the $1.3456/£ cross-rate next six months. If the cross-rate changes to $1.4321/£, how much gain or loss will the company experience per every car sale in the U.S. in British pound terms? £2,402.60 £1.963.02 £2,257.48 £3,232.94

Land Rover has full manufacturing costs of their Evoque crossover of £32,500. They sell the Evoque crossover in the UK with a 15% profit margin. Today the spot exchange rate is $1.3456/£ and Land Rover has committed to keeping the U.S. price based on the $1.3456/£ cross-rate next six months. If the cross-rate changes to $1.4321/£, how much gain or loss will the company experience per every car sale in the U.S. in British pound terms? £2,402.60 £1.963.02 £2,257.48 £3,232.94

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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Concept explainers

Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.

Question

Land Rover has full manufacturing costs of their Evoque crossover of £32,500. They sell the Evoque
crossover in the UK with a 15% profit margin. Today the spot exchange rate is $1.3456/£ and Land Rover
has committed to keeping the U.S. price based on the $1.3456/£ cross-rate next six months. If the cross-rate
changes to $1.4321/£, how much gain or loss will the company experience per every car sale in the U.S. in
British pound terms?
£2,402.60
£1,963.02
£2,257.48
£3,232.94

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