Question
Assume that Deborah Electronics expects a delivery of Fujitsu laptops in a month from a Japanese supplier. Each laptop sells at $1000 in the retail
Assume that Deborah Electronics expects a delivery of Fujitsu laptops in a month from a Japanese supplier. Each laptop sells at $1000 in the retail market whereas the import cost is 90,000 per unit. The spot exchange rate today is 95.238 per US dollar, but in 30 days the dollar is expected to depreciate to 86.956. Deborah Electronics can either (i) wait for a month and pay the supplier at the expected spot exchange rate or (ii) enter a 30-day forward exchange deal with Bank of America to buy yen forward at 92.308 per dollar. Calculate profit (or loss) per laptop under each scenario and suggest Deborah Electronics the better option.
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