Your brewery produces bakersfield Bland, a low calorie, low taste beer that has

Question

Your brewery produces bakersfield Bland, a low calorie, low taste beer that has yet developed International following. In mid-march, you receive an order of 10,000 cartons from Munich, Germany for the next Oktoberfest, with payment of Euro 672,000 due in mid-september before the beer is consumed. In your opinion, the Euro will rise from its present rate of Euro 2.8000/$ to Euro 2.6500/$ by September, and you learn you can borrow Euro's for six months at 6% P.A. Note the answers are either correct or they are not their are no transpositions

If you lock into a forward contract, you will receive

Select one:

a. $233,010

b. 4253,585

c. euro652,427

d. need more information

Explanation / Answer

Payment at the end of 6 months is Euro 672000. If we lock forward contract @ euro 2.65000/$. Amount we will get at the end of 6 month will be

$ 672000/2.65

If you lock into a forward contract, you will receive=$253585

Option B is the answer

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