Question

U2 - 2

You are an international shrimp trader. A food producer in the Czech Republic offers to pay you

2.4 million Czech koruna today in exchange for a year’s supply of frozen shrimp. Your Thai supplier will provide you with the same supply for 2.9 million Thai baht today. Current competitive markets exchange rates are 20.38 koruna per dollar and 40.17 baht per dollar,

a. The Czech? buyer’s offer is ?$____ ?(Round to the nearest? cent.)

b. If the current competitive markets exchange rates are 20.38 koruna per dollar and 40.17 baht per dollar, what is the value of this deal?

Answer 1

Solution

Offer by the buyer in the Czech Republic = 2.4 million Czech koruna

Offer by the supplier from Thailand = 2.9 million Thai Baht

USD vs Czech koruna exchange rates are 20.38 koruna per dollar

USD vs Thai Baht exchange rates are 40.17 baht per dollar

Part A )

Buyer's offer = 2.4 million Czech koruna

Convert this into dollars by dividing with exchange rate = 2.4 million/ 20.38 = $117762.51

The answer to part A is $117762.51

Part B )

Suppliers offer = 2.9 million Thai Baht

Convert this into dollars by dividing with exchange rate = 2.9 million/ 40.17 = $72.193.18

Value of deal = Buyer offer - supplier offer = $117762.51 - $72.193.18? = $45569.33