Week 4: CheckPoint - Exchange Rates Research
The exchange rates for trading U.S. Dollars to Yen is .009035 Yen per
U.S. Dollar as a spot rate and .009048 Yen per U.S. Dollar for the one
month forward exchange rate (Ball, McCulloch, Frantz, Geringer, Minor,
2006, p. 328). Since the company only requires 100,000 Yen for a
payment next month it is in the company's best interest to do the
forward exchange. Due to the small value of the transaction,
$904.80 for the forward exchange, there is no value in tying up our
assets for a net savings of $1.30. If the currency transaction
was much larger, or there was a much wider gap between spot and forward
exchange rates, it would then be beneficial to exchange the currency
now.
© Erik Smith 2005
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