A U.S. company sells goods today to a German company for 350,000. The current exchange...
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A U.S. company sells goods today to a German company for 350,000. The current exchange rate is 0.25, the account is payable in three months, and the company chooses to avoid any hedging techniques designed to reduce or eliminate the risk of exchange rate fluctuations. 1. Does the U.S. company stand to lose if the exchange rate is $0.22/ or $0.28/? The fee for the banker's acceptance is 3% per year. The term of the bank acceptance is 3 months. The exporter also offers a discount of 1% (per year) to his bank for receiving payment in one lump sum. 2. Calculate the net amount received by the exporter in $ according to the two scenarios.
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