Transaction

exposure.

International Products has contracted for

5,000

winter hats from Russia. The contract price is

1,250

rubles per hat. The current direct exchange rate is

0.03549.

The expected inflation rate for the next

12

months is

6.7%

in the United States and

3.3%

in Russia. If International Products will pay for the hats at delivery and scheduled delivery is

12

months away, what is the cost of the hats in U.S. dollars? Did waiting the

12

months to pay increase or decrease the payment (in U.S. dollars)? If so, by how much?

Question content area bottom

Part 1

If International Products will pay for the hats at delivery and scheduled delivery is

12

months away, what is the cost of the hats in U.S. dollars?