Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN: 9781337395083
Author: Eugene F. Brigham, Phillip R. Daves
Publisher: Cengage Learning
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Chapter 27, Problem 11P

Boisjoly Watch Imports has agreed to purchase 15,000 Swiss watches for 1 million francs at today’s spot rate. The firm’s financial manager, James Desreumaux, has noted the following current spot and forward rates:

Chapter 27, Problem 11P, Boisjoly Watch Imports has agreed to purchase 15,000 Swiss watches for 1 million francs at today’s

On the same day, Desreumaux agrees to purchase 15,000 more watches in 3 months at the same price of 1 million Swiss francs.

  1. a. What is the cost of the watches in U.S. dollars, if purchased at today’s spot rate?
  2. b. What is the cost in dollars of the second 15,000 batch if payment is made in 90 days and the spot rate at that time equals today’s 90-day forward rate?
  3. c. If the exchange rate for is 0.50 Swiss francs per dollar in 90 days, how much will Desreumaux have to pay (in dollars) for the watches?
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Boisjoly Watch Imports has agreed to purchase 15,000 Swiss watches for 1 million francs at today's spot rate. The firm's financial manager, James Desreumaux, has noted the following current spot and forward rates:                       U.S. Dollar / Franc Franc / U.S. Dollar           Spot   1.6590 0.6028   30-day forward   1.6540 0.6046   90-day forward   1.6460 0.6075   180-day forward   1.6400 0.6098                   On the same day, Desreumaux agrees to purchase 15,000 more watches in 3 months at the same price of 1 million francs.                 What is the cost of the watches, in U.S. dollars, if purchased at today's spot rate?                 Cost of Watches  = Swiss Francs / Franc/U.S Dollar
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