In 2014, Germanys Volkswagen (VW) makes a contract with Malaysia to supply 100 cars in 2015. 700,000

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In 2014, Germany’s Volkswagen (VW) makes a contract with Malaysia to supply 100 cars in 2015. €700,000 is to be paid on the date of supply. Suppose today’s rate is Malaysian ringgit (MYR) 3>€ and the expected exchange rate for next year is MYR 3.15>€. Suppose after the deal, the rate changed to MYR 3.10>€.

In this case, what will happen to VW’s expected gain and loss in bonus in 2015?

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Rashul Chutani

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