Question

You manufacture wine goblets. In mid-June, you receive an order for 10,000 goblets from Japan. Payment of $¥ 400,000$ is due in mid-December. You expect the yen to rise from its present rate of $$\$ 1=¥ 130$$ to $$\$ 1=¥ 100$$ by December. You can borrow yen at 6 percent a year. What should you do?

   You manufacture wine goblets. In mid-June, you receive an order for 10,000 goblets from Japan. Payment of $¥ 400,000$ is due in mid-December. You expect the yen to rise from its present rate of $$\$ 1=¥ 130$$ to $$\$ 1=¥ 100$$ by December. You can borrow yen at 6 percent a year. What should you do?

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Global Business Today

Global Business Today

Charles W. L. Hill… 10th Edition

Chapter 10, Problem 4

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Step 1

You expect the yen to appreciate from ¥130 per US dollar to ¥100 per US dollar by December. This means that if you wait until December to convert the payment from yen to dollars, you will receive fewer dollars for the same amount of yen. Specifically, if the yen Show more…

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You manufacture wine goblets. In mid-June, you receive an order for 10,000 goblets from Japan. Payment of $¥ 400,000$ is due in mid-December. You expect the yen to rise from its present rate of $$\$ 1=¥ 130$$ to $$\$ 1=¥ 100$$ by December. You can borrow yen at 6 percent a year. What should you do?

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