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
On the same day, Desreumaux agrees to purchase 15,000 more watches in 3 months at the same price of 1 million Swiss francs.
- a. What is the cost of the watches in U.S. dollars, if purchased at today’s spot rate?
- 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?
- 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
Finance
Williams Corp. is considering signing contracts that will obligate the firm to purchase 100000 Swiss Francs worth of computer equipment at the end of each calendar quarter for the next 2 years. Williams is also signing a contract with a local high school that will purchase this equipment from Williams at a price of $87000 (U.S.) per quarter. What would Williams' profit or loss be over the life of the contract (8 quarters) if the "In US Dollar" exchange rate is $0.85over the life of the contract?$______________________Place your answer to the nearest dollar without a dollar sign or a comma.
Chapter 27 Solutions
Intermediate Financial Management (MindTap Course List)
Ch. 27 - Define each of the following terms: a....Ch. 27 - Prob. 2QCh. 27 - Prob. 3QCh. 27 - Prob. 4QCh. 27 - If the United States imports more goods from...Ch. 27 - Prob. 6QCh. 27 - Should firms require higher rates of return on...Ch. 27 - Prob. 8QCh. 27 - Prob. 9QCh. 27 - Prob. 10Q
Ch. 27 - Prob. 1PCh. 27 - The nominal yield on 6-month T-bills is 7%, while...Ch. 27 - Prob. 3PCh. 27 - If euros sell for 1.50 (U.S.) per euro, what...Ch. 27 - Suppose that the exchange rate is 0.60 dollars per...Ch. 27 - Prob. 6PCh. 27 - Prob. 7PCh. 27 - Prob. 8PCh. 27 - Prob. 9PCh. 27 - Prob. 10PCh. 27 - Boisjoly Watch Imports has agreed to purchase...Ch. 27 - Prob. 12PCh. 27 - Prob. 13PCh. 27 - Prob. 14PCh. 27 - Prob. 1MCCh. 27 - Prob. 2MCCh. 27 - Prob. 3MCCh. 27 - Prob. 4MCCh. 27 - Prob. 5MCCh. 27 - Prob. 6MCCh. 27 - Prob. 7MCCh. 27 - Prob. 8MCCh. 27 - Prob. 9MCCh. 27 - Prob. 10MCCh. 27 - Prob. 11MCCh. 27 - Prob. 13MC
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