# solution

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 140.0 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? Group of answer choices \$845,207.25 \$1,048,056.99 \$659,261.66 \$676,165.80 \$1,039,604.92

2.

A pair of headphones sells for \$40.11 in the United States. The exchange rate between the U.S. dollar and the Swiss franc (SFr) is \$0.8053 per Swiss franc.

Assuming that PPP holds true, how much does the same pair of headphones cost in Switzerland?

SFr 62.26

SFr 44.83

SFr 49.81

SFr 59.77

3.

Suppose you observe the following spot and forward exchange rates between the U.S. dollar (\$) and the Canadian dollar (C\$):

The current one-year interest rate on U.S. Treasury securities is 8.03%. If interest rate parity holds, what is the expected yield on one-year Canadian securities of equal risk?

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