you are assigned the duty of ensuring the availability of 100,000 yen for the payment that is scheduled for next month. Considering that your compant possesses only U.S. dollars, identify the spot and forward exchange rates. What are the factors that affect your decision of utilizing spot versus forward exchange rates? Which one would you choose? How many dollars do you have to spend to acquire the amount of yen required?
*****It would acquire $942.77 US dollars to acquire 100,000 yen. Im just confused with the other questions.
P.S. Because the rate of exchange changes so often, I got $942.285080.
Sra
To identify the spot and forward exchange rates for converting U.S. dollars to Japanese yen, you have a few options:
1. Use an online currency converter: You can use a reliable currency converter website or mobile app that provides real-time spot exchange rates. Simply input the amount of U.S. dollars you want to convert, and it will give you the equivalent amount in Japanese yen.
2. Check with your bank: Contact your bank and inquire about the current spot exchange rate for converting U.S. dollars to Japanese yen. Banks often have competitive rates and can provide you with accurate information.
The decision to utilize spot or forward exchange rates depends on various factors, such as the purpose of the payment, the exchange rate outlook, and your risk tolerance. Here are some factors to consider:
Spot exchange rates:
- Spot rates are the current exchange rates for immediate transactions.
- Utilizing spot rates is suitable if you need to make an immediate payment or if you anticipate the exchange rates are favorable at the moment.
- Spot rates are generally less predictable and can fluctuate frequently.
Forward exchange rates:
- Forward rates are exchange rates agreed upon today for a transaction that will occur in the future (usually after two business days up to a year).
- Utilizing forward rates is suitable if you expect the exchange rates to potentially move in an unfavorable direction before your payment is due.
- Forward rates offer protection against currency fluctuations and provide greater certainty about the payment amount in the foreign currency.
Ultimately, the decision between spot and forward rates should be based on your assessment of the exchange rate trend, your tolerance for risk, and the urgency of the payment.
Now, to calculate how many U.S. dollars you will need to acquire 100,000 yen, you can use the spot exchange rate:
Let's assume the spot exchange rate is 1 USD = 105 yen.
Using this exchange rate, divide 100,000 yen by 105 yen/USD:
100,000 yen / 105 yen/USD = 952.38 USD.
Therefore, you would need approximately $952.38 USD to acquire 100,000 yen.