Shown below are exchange rates for several currencies. US$ per 1 euro US$ per 1 franc Mexican peso per...

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Shown below are exchange rates for severalcurrencies.
US$ per 1 euro US$ per 1 franc Mexican peso per US$1
Spot rate 1.21 1.03 19.68
30-day forward rate 1.19 1.06 20.15
60-day forward rate 1.15 1.07 21.28
A U.S. company purchases goods from several foreign companieswith payment due in euros, francs, and pesos. Would thecompany be better off paying any of the suppliers now or should itwait 60 days? Why?

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3.8 Ratings (533 Votes)

1 Purchases in euros It is better to pay 60 days later as only lesser number of dollars would be needed to buy the euros then If the amount payable is 1000 euros Paying now will require 1000121 121000 See Answer

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Shown below are exchange rates for severalcurrencies. US$ per 1 euroUS$ per 1 francMexican peso per US$1Spot rate1.211.0319.6830-day forward rate1.191.0620.1560-day forward rate1.151.0721.28A U.S. company purchases goods from several foreign companieswith payment due in euros, francs, and pesos. Would thecompany be better off paying any of the suppliers now or should itwait 60 days? Why?

	US$ per 1 euro	US$ per 1 franc	Mexican peso per US$1
Spot rate	1.21	1.03	19.68
30-day forward rate	1.19	1.06	20.15
60-day forward rate	1.15	1.07	21.28