Langford Woodworks, Inc., manufactures custom window shutters on a job-order basis. Langford has invested heavily in precision woodworking equipment. As a result, the company has a reputation for producing excellent quality interior shutters. Sales are made in all 50 states. On July 1, Langford received orders from interior designers in Sweden and Japan. Al Langford, president and co-owner of Langford Woodworks, was delighted. The Swedish order for shutters is priced at $150,000. The order is due in Stockholm on September 1, with payment due in full on October 1. The Japanese order for shutters is $65,000. It is due in Tokyo on August 1, with payment due in full on October 1. Both orders are to be paid in the customer's currency. The Swedish customer has a reputation in the industry for late payment, and it could take as long as six months. Al has never received payment in foreign currency before and was concerned about fluctuations in exchange rates. 

He had his accountant gather data and prepare the following table of exchange rates.

	Exchange Rate for $1 Swedish Krona	Yen
Spot rate, July 1	8.60	107.60
30-day forward	8.64	107.61
90-day forward	8.65	107.60
180-day forward	8.69	107.55

Required:

1. If the price of the shutters is set using the spot rate as of July 1, how many krona does Al expect to be paid on October 1? How many yen does he expect on October 1?

2. Using the number of krona and yen calculated in Requirement 1, how many dollars does Al expect to receive on October 1?

Answer rating: 100% (QA)

Answer 1 Amount which AI would receive if the price is set using spot rate as ... View the full answer