Jumper LLC., based in Washington, exports products to a German firm and will receive payment of...
Jumper LLC., based in Washington, exports products to a German firm and will receive payment of €200,000 in three months. On June 1, the spot rate of the euro was $1.12, and the 3-month forward rate was $1.11. On June 1, Jumper negotiated a forward contract with a bank to sell €200,000 forward in three months. The spot rate of the euro on September 1 is $1.15. Jumper will receive $_______ for the euros.
Homework Answers
Under forward contract, the rate is fixed at which transaction will take place in future. It is used as a hedging measure against changing exchange rates
Forward Rate = $1.11
Amount = Euro 200,000
Hence, Amount received in Dollars = 200,000*1.11
= $222,000
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