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18 February, 04:38

On July 15, 2016, you convert 650,000 U. S. dollars to Japanese yen in the spot foreign exchange market and purchase a six-month forward contract to convert yen into dollars. How much will you receive in U. S. dollars at the end of six months

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  1. 18 February, 04:48
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    The question is not complete:

    On July 15, 2016, you convert 650,000 U. S. dollars to Japanese yen in the spot foreign exchange market (¥104.91/$) and purchase a six-month forward contract ($0.0095320/¥1) to convert yen into dollars. How much will you receive in U. S. dollars at the end of six months? (Round your answer to 2 decimal places. (e. g., 32.16))

    The sum of $650,001.38 would be received in six months

    Explanation:

    In the first place by buying the yen in the spot market on July 15,2016, the amount of yen is computed thus:

    $650,000 was at (¥104.91/$), which implies that each $ was exchanged for ¥104.91

    yen received = $650,000*104.91/1

    = ¥ 68,191,500.00

    The six month forward contract outcome is as follows:

    ($0.0095320/¥1)

    each Yen was exchanged $0.0095320

    dollars received = ¥ 68,191,500.00 * 0.0095320/1

    =$650,001.38
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Home » Business » On July 15, 2016, you convert 650,000 U. S. dollars to Japanese yen in the spot foreign exchange market and purchase a six-month forward contract to convert yen into dollars. How much will you receive in U. S. dollars at the end of six months
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