Suppose that a US-based company is buying Chinese goods. Current exchange rate for Chinese Yuan is 0.15

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Suppose that a US-based company is buying Chinese goods. Current exchange rate for Chinese Yuan is 0.15 USD. The price of goods is ¥13,000 per unit. The company is buying 800 units per year with a fixed contract for the next two years. Suppose that Chinese Yuan appreciate to 0.2 USD in the next year. The US importer will respond to this by lowering the demand to 600 units in the third year.

a) What cash flow will be reflected on the balance of payments at the end of the first year?

b) What cash flow will be reflected on the balance of payments at the end of the second year?

c) What cash flow will be reflected on the balance of payments at the end of the third year?

Posted Date: Sep 26, 2021 09:25 PM

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Suppose that a US-based company is buying Chinese goods. Current exchange rate for Chinese Yuan is 0.15

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