A UK company sells a car to a German customer for €22,000 and gives three months’ credit, with payment to be received in euros. At the current spot rate of €1.124/£ the company expects to receive 22,000/1.124 = £19,573. If the German customer takes three months’ credit and in this period the exchange rate moves to €1.208/£, the UK company will receive only £18,212 when it exchanges euros into sterling. This is 7 per cent less than the current sterling value.