Suppose your company imports computer motherboards from Singapore. The exchange
ID: 2737635 • Letter: S
Question
Suppose your company imports computer motherboards from Singapore. The exchange rate is currently 1.2843 S$/US$. You have just placed an order for 27,000 motherboards at a cost to you of 234.50 Singapore dollars each. You will pay for the shipment when it arrives in 90 days. You can sell the motherboards for $196 each. What is your profit at the current exchange rate? Profit at the current exchange rate $ What is your profit if the exchange rate goes up by 10 percent? Profit if the exchange rate up by 10% $ What is your profit if the exchange rate goes down by 10 percent? Profit if the exchange rate down by 10% $ What is the break-even exchange rate? Break-even exchange rate S$/$ What percentage rise or fall does this represent in terms of the Singapore dollar versus the U.S. dollar? Percentage change % [(Click to select)Explanation / Answer
1.Calculation of profit at current exchange rate :
Exchange rate = s$1.2843/US$ (In direct quote in US)
Sale price per mother board = US$196.00
Less: Cost price per mother board = US$182.59 (234.50/1.2843)
Profit per one mother board = US$13.41
Total profit = $362070 (27000*13.41)
2) If exchange rate goes up by 10% then profit :
Current exchange rate = S$1.2843/US$
Increase exchange rate = S$1.4127 (1.2843+10%)
Sale price per mother board = US$196
Less: Cost price per mother board = US$166 (234.50/1.4127)
Profit per one mother board = US$30
Total profit = US$810,000 (27000*$30)
Note: in case of indirect quote increase in exchange rate will strengthen the domestic currency and make the foreign currency to fall.
3) if exchange rate goes down by 10% then the profit :
In case of indirect quote decreased or a lower exchange rate implies that the domestic currency is falling or depreciating or becoming weaker.
Current exchange rate = S$1.2843/US$
Decreased exchange rate= S$1.1559/US$ (1.2843 - 10%)
Sale price per mother board = US$196
less:Cost price per mother board= US$202.88
Loss per mother board =(US$6.88)
Total loss = US$185760 (27000*6.88)
4) Break even exchange rate :
Break even exchange rate = Cost price in singapore dollars / Sale price in US dollars
= 234.50 / 196
= S$1.1964/US$
5) Percentage rise or fall in break even exchange rate interms of singapore dollar versus US dollar :
Current exchange = $1.2843
Break even exchange rate = $1.1964
It was showing a increase in singapore dollars value versus US dollar Value.
It was showing a fall of 6.844% ((1.2843 - 1.1964)/1.2843) in exchange rate singapore dollar versus US dollar.
Singapore dollar value was increase by 6.844% over current exchange rate,So that domestic currency value was decrease by the same percentage.
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