Question

Assume your U.S. firm has a contract to purchase 100,000 computers from a Korean company. The payment is due on receipt of the shipment and must be delivered in Korea on December 31, 2018. In July 2018, when you are arranging the contract, the computers are priced at 500,000 won each. The spot rate in July 2018 is $1 in exchange for 1,088 won. A) Calculate the U.S. dollar price (in July 2018) of one unit of Korean currency.(4 points) B) What is the total price of the computers in dollars? (7 points) C) What is the total price of the computers in won? (7 points)

Answer 1

Spot Rate : 1088won/$1

Part A :

1088 won = $1

1 won = $1/1088

1 won = $0.00092

Part B :

Price of 1 computer in won = 500,000

Price of 1 computer in $US = 500,000 × $0.00092 = $460

Price of 100,000 computers = $460 × 100,000 = $46,000,000

Part C :

Price of 100,000 computers in won = 500,000 × 100,000 = 50,000,000,000 won

Or,

$1 = 1088 won

Therefore, $46,000,000 = 1088 × 46,000,000 = 50,048,000,000 won

Therefore, Total price of 100,000 computers in won = 50,048,000,000 won