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Exchange Rate

A U.S. company orders merchandise from a Japanese company at a cost of 100 million yen. The merchandise must be paid for in yen. Exchange rates are shown below.

U.S. Dollar/Yen Yen/U.S... Dollar
Spot 105 0.00952381
30-day forward 110 0.009090909
90-day forward 111 0.009009009
180-day forward 115 0.008695652

a. How many U.S. dollars must be raised if payment is due today?
b. Is the dollar appreciating or depreciating against the yen? Explain.
c. How many U.S. dollars must be raised if payment is due in 30 days?

Solution Summary

The solution calculates the dollars that must be raised to make payments in yen- today and after 30 days. The solution identifies the currency that is appreciating and the currency that is depreciating.

$2.19