Boisjoly Watch Imports has agreed to purchase 15,000 Swiss watches for 1 million francs at today's spot
Question:
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:
On the same day, Desreumaux agrees to purchase 15,000 more watches in 3 months at the same price of 1 million francs.a. What is the price 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 the Swiss franc is 0.50 to $1 in 90 days, how much will Desreumaux have to pay (in dollars) for the watches?
Exchange RateThe value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...
Step by Step Answer:
a SFr 1000000 16590 SFr 1659000 or SFr 1000000 06028 1658925 Difference is d...View the full answer
Corporate Finance A Focused Approach
ISBN: 978-1439078082
4th Edition
Authors: Michael C. Ehrhardt, Eugene F. Brigham
