Finance for Business, Problems 19-1,19-2,19-3
19–1. (Converting currencies) An American business needs to pay
(a) 10,000 Canadian dollars,
(b) 2 million yen, and
(c) 50,000 Swiss francs to businesses abroad.
What are the dollar payments to the respective countries?
(a) Canadian dollars:
U.S dollar payment = 10,000 Canadian $ x .8437 = $8,437
In order to buy 10,000 Canadian dollars, the American business needs $8,299, given that the exchange rate is $0.8437
(b) Japanese yen:
U.S. dollar payment = 2,000,000 yen x .004684 = $9,368
In order to buy 2 million yen, the American business needs $9,368, given the exchange rate is .004684.
(c) Swiss francs:
U.S. dollar payment = 50,000 Swiss francs x .5139 = $25,695
In order to buy 50,000 Swiss francs, the American business needs $25,695, given that the exchange rate is .5139
19–2. (Converting currencies) An American business pays $10,000, $15,000, and $20,000 to suppliers in Japan, Switzerland, and Canada, respectively. How much, in local currencies, do the suppliers receive?
(a) Japan suppliers:
Indirect Quote = 1/.004684 = 213.4927 (yen / U.S $)
Foreign currency amount = U.S. $10,000 x 213.4927 = 2,134,927 Yen
If the American business pays $10,000, the suppliers in Japan will receive 2,134,927 Japanese yen.
(b) Swiss suppliers:
Indirect quote = 1/.5139 = 1.9459 (Swiss franc/U.S $)
Foreign currency amount = U.S. $15,000 x 1.9459 = 29,188.5 SFr
If the American business pays $15,000, the suppliers in Switzerland will receive 29,188.5 Swiss Francs.
(c) Canadian suppliers:
Indirect quote = 1/.8437 = 1.1856 (Canadian dollar / U.S. $)
Foreign currency amount = U.S. $20,000 x 1.1856 = C$23,712
If the American business pays $20,000, the suppliers in Canada will receive 23,712 Canadian dollars.
19–3. (Indirect quotes) Compute the indirect quote for the spot and forward Canadian dollar, yen, and Swiss franc contracts.
(a) Canadian rates:
Indirect quote (spot) = 1/.8437 = 1.1853
Indirect quote (30-day) = 1/.8417 = 1.1881
Indirect quote
(a) 10,000 Canadian dollars,
(b) 2 million yen, and
(c) 50,000 Swiss francs to businesses abroad.
What are the dollar payments to the respective countries?
(a) Canadian dollars:
U.S dollar payment = 10,000 Canadian $ x .8437 = $8,437
In order to buy 10,000 Canadian dollars, the American business needs $8,299, given that the exchange rate is $0.8437
(b) Japanese yen:
U.S. dollar payment = 2,000,000 yen x .004684 = $9,368
In order to buy 2 million yen, the American business needs $9,368, given the exchange rate is .004684.
(c) Swiss francs:
U.S. dollar payment = 50,000 Swiss francs x .5139 = $25,695
In order to buy 50,000 Swiss francs, the American business needs $25,695, given that the exchange rate is .5139
19–2. (Converting currencies) An American business pays $10,000, $15,000, and $20,000 to suppliers in Japan, Switzerland, and Canada, respectively. How much, in local currencies, do the suppliers receive?
(a) Japan suppliers:
Indirect Quote = 1/.004684 = 213.4927 (yen / U.S $)
Foreign currency amount = U.S. $10,000 x 213.4927 = 2,134,927 Yen
If the American business pays $10,000, the suppliers in Japan will receive 2,134,927 Japanese yen.
(b) Swiss suppliers:
Indirect quote = 1/.5139 = 1.9459 (Swiss franc/U.S $)
Foreign currency amount = U.S. $15,000 x 1.9459 = 29,188.5 SFr
If the American business pays $15,000, the suppliers in Switzerland will receive 29,188.5 Swiss Francs.
(c) Canadian suppliers:
Indirect quote = 1/.8437 = 1.1856 (Canadian dollar / U.S. $)
Foreign currency amount = U.S. $20,000 x 1.1856 = C$23,712
If the American business pays $20,000, the suppliers in Canada will receive 23,712 Canadian dollars.
19–3. (Indirect quotes) Compute the indirect quote for the spot and forward Canadian dollar, yen, and Swiss franc contracts.
(a) Canadian rates:
Indirect quote (spot) = 1/.8437 = 1.1853
Indirect quote (30-day) = 1/.8417 = 1.1881
Indirect quote