DeMagistris Fashion Company, based in New York City, imports leather coats from Acu$$a Leather Goods,

a reliable and longtime supplier, based in Buenos Aires, Argentina. Payment is in Argentine pesos. When

the peso lost its parity with the U$.$S$.$ dollar in January $2002$ it collapsed in value to Ps $4\mathrm{.}0/$$ by October

$2002.$ The outlook was for a further decline in the peso$$s value. Since both DeMagistris and Acu$$a wanted

to continue their longtime relationship they agreed on a risk$-$sharing arrangement. As long as the spot rate

on the date of an invoice is between Ps$3\mathrm{.}5/$$ and Ps$4\mathrm{.}5/$$ DeMagistris will pay based on the spot rate. If the

exchange rate falls outside this range, they will share the difference equally with Acu$$a Leather Goods.

The risk$-$sharing agreement will last for six months, at which time the exchange rate limits will be

reevaluated. DeMagistris contracts to import leather coats from Acu$$a for Ps$8,000,000$ or $$2,000,000$ at the

current spot rate of Ps$4\mathrm{.}0/$$ during the next six months.

If the exchange rate changes immediately to Ps$6\mathrm{.}00/$$$,$

a$.$ Which party benefits, DeMagistris Fashion Company or Acu$$a Leather Goods?

b$.$ What will be the dollar cost of $6$ months of imports to DeMagistris under the risk$-$sharing

arrangement