Question

4 pts Question 18 Dell is selling 20,000 units in Europe at an average price of 1,700 per unit. Both the spot and forward exchange rates ar $1.20/€. The cost of each unit in dollars is $1,500 per unit. The elasticity of demand for Dell computers in Europe is e = 1.5. What are respectively the delta and exposure for Dell's dollar profit when passthrough 0.5? delta 2.566; exposure €23,094,000 million delta-1.137; exposure 10,233,000 million O delta 1.981; exposure 17,829,000 million delta-5.741: exposure E51,660,000 million

Answer 1

Selling price = 20k ×1700 =€34 Million

Cost price = 20k × 15 00 = $30 Million

Converting $ into €

30 Million / 1.20 = €25 Million

Profit percentage = (34M - 25M/25 M) × 100 = 36% or .36

Delta = h₁/ r

Where h₁ = fraction for foreign currency revenue

r= profit rate

The profit rate is .36

Therefore delta = 1.981 and exposure is 17,829,000