What is the cost of the watches in usd

Assignment Help Financial Management

Reference no: EM131983941

Seiko is intending to increase its sales. A total of 20 000 Swiss watches will be purchased for 2 million francs at today's spot rate. The company's financial manager has noted the following current spot and forward rates:

ITEM	USD/Swiss Franc	Swiss Francs/USD
Spot	1.6590	0.6028
30-day forward	1.6540	0.6046
90-day forward	1.6460	0.6075
180-day forward	1.6400	0.6098

On the same day, the financial manager agrees to purchase 20 000 more watches in 3 months at the same price of 2 million Swiss francs.

2.1 What is the cost of the watches in USD, if purchased at today's spot rate?

2.2 What is the cost in dollars of the second 20 000 batch if payment is made in 90 days and the spot rate at that time equals today's 90-day forward rate?

2.3 If the exchange rate is 0.50 Swiss franc per dollar in 90 days, how much will the finance manager have to pay (in dollars) for the watches?

Reference no: EM131983941

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