Economic and Financial Forces

Topics: United States dollar, Currency, International trade Pages: 4 (670 words) Published: October 9, 2010
Economic and Financial Forces

By Nicole Bush


For my two countries to export and import to and from, I chose to work with

Japan and Italy. I looked up the information for both of their currencies which are Yen

and the Euro. The product that I chose to export to these two countries is diamonds, and I

chose to import from them designer handbags. I watched the currency exchange rates on

October first and then again on October seventh, and I will show my finding below.

The business deal I made with Japan and Italy was to export to them on October

first $240,000 worth of diamonds. My transportation of the diamonds was my only

expense which cost me $10,000 to get them there, leaving me with asking them to pay me

$250,000 in their respective currencies. I am selling them the diamonds at my cost in

order to get a cheaper price on their handbags. Then on October seventh, with the

$250,000 they gave my, I am going to purchase that amount of handbags in their

respective currency and turn them for a large profit, however I hadn’t accounted for any

fluctuation in currency values.

The first company we will examine the exchange rates for will be Japan. On

October first I sent them the diamonds and with transportation fee this gave me $250,000

which translated to 20,840,905 Yen since the exchange rate that day was 83.36362. Then

on October seventh I was expecting to get that amount back in handbags but the value of

the Yen went down to 82.53112 leaving me getting 20,632,780 yen worth of handbags

instead. If I divide that number by the original exchange rate I get $247,503.40 which

means I lost approximately $2496.60 American dollars in designer handbags that I

expected to get and sell at a profit.

Now we will examine the effects of the exchange rates with Italy. On October

first I sent them the diamonds and with transportation fee this game me $250,000 which

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