The US Imports Company purchased 100,000 Freedonian marks' worth of machinery from a firm in Zeppo, Freedonia.
Question:
a. Compute the dollar cost of paying the account within the 10-day discount period.
b. Compute the dollar cost of buying a forward contract to liquidate the account in 90 days.
c. The differential between the correct answers to Parts (a) and (b) is the result of the time value of money (the discount for prepayment) and protection from currency value fluctuation. Determine the magnitude of each of these components.
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Related Book For
Fundamentals Of Financial Management
ISBN: 9780273713630
13th Revised Edition
Authors: James Van Horne, John Wachowicz
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