A UScompany That Imports Laptop Computers from Japan Knows That in in 30

question 7

Multiple Choice

A U.S.company that imports laptop computers from Japan knows that in 30 days it must pay yen to a Japanese supplier when a shipment arrives.The company will pay the Japanese supplier $\times$ 150,000 for each computer,and the current dollar/yen spot exchange rate is $1 = $\times$ 110.The importer knows she can sell the computers the day they arrive for $1,600 each.However,the importer will not have the funds to pay the Japanese supplier until the computers have been sold.The importer enters into a 30-day forward exchange transaction with a foreign exchange dealer at $1 = $\times$ 105.Which of the following will happen if the exchange rate after 30 days is $1 = $\times$ 90?

• A)The importer will earn a profit of $236 per computer.
• B)The importer will earn a profit of $171 per computer.
• C)The importer will earn a profit of $65 per computer.
• D)The importer will incur a loss of $67 per computer.

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Definitions:

Interest Receivable

The amount of interest that has been earned but not yet received in cash.

Total Proceeds

The total amount received from a transaction, including the sale of assets, securities, or other property, before any deductions or expenses.

Sale

The exchange of a good or service for money; a transaction between two parties where the buyer acquires ownership of the item.

Interest Revenue

Income earned from lending money or other types of investments that yield interest.