Suppose DeGraw Corporation, a U.S. exporter, sold a solar heating station to a J

Question

Suppose DeGraw Corporation, a U.S. exporter, sold a solar heating station to a Japanese customer at a price of 130.5 million yen, when the exchange rate was 140 yen per dollar. In order to close the sale, DeGraw agreed to make the bill payable in yen, thus agreeing to take some exchange rate risk for the transaction. The terms were net 6 months. If the yen fell against the dollar such that one dollar would buy 154.4 yen when the invoice was paid, what dollar amount would DeGraw actually receive after it exchanged yen for U.S. dollars?

Explanation / Answer

De Graw would receive 130.5 million yen from Japanese customer

It would exchange at the rate of 154.4 yen per dollar

Hence, Dollars received=130.5/154.4 million=0.845207 million=845207 dollars

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