Exchange Transactions
Not what you're looking for?
Here is the question (please explain as detail as possible):
Suppose France is trading 600 units of wine to Germany for 300 machines at a relative price of 2wine per machine. Merchants sign contracts three months before payments are made, and all merchants wish to hedge exchange risk. Describe completely all forward exchange transactions that take place when the contracts are made. Describe what actually takes place three months later.
Purchase this Solution
Solution Summary
Exchange Transactions are discussed very comprehensively in this explanation.
Solution Preview
Exchange Transactions
Here is the question (please explain as detail as possible):
Suppose France is trading 600 units of wine to Germany for 300 machines at a relative price of 2wine per machine. Merchants sign contracts three months before payments are made, and all merchants wish to hedge exchange risk. Describe completely all forward exchange transactions that take place when the contracts are made. Describe what actually takes place three months later.
Let us assume that the rate of conversion now ( at the time of contract) is 1 German Mark equals to 3.5 French Franc. Also if the cost of each unit of wine is 7 Francs then the cost of each machine will be 4 Marks. Remember 2 wines per machine and 14 Francs equals 4 Marks.
France wants to receive a payment of 600 X 7 = 4,200 Francs after ...
Education
- BSc , University of Calcutta
- MBA, Eastern Institute for Integrated Learning in Management
Recent Feedback
- "I read your comments, and thank you for this feedback. Do I need to find other studies that applied this methodology Ive used? That's where I'm stuck at."
- "Thank you kindly sir. "
- "Excellent and well explained. --Thank you kindly. "
- "Awesome notes. I appreciate you."
- "I have the follow-up project and I will assign that to you very soon. "
Purchase this Solution
Free BrainMass Quizzes
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.