Final Answer:
If the company in Chile pays 9.8 million pesos in 3 months, with the current exchange rate at 490 pesos/US$, the U.S.-based company would receive approximately $20,000. However, if the exchange rate at the time of payment becomes 510 pesos/US$, the U.S.-based company would then receive around $19,215.
Step-by-step explanation:
In the initial scenario, with the exchange rate at 490 pesos/US$, the calculation is straightforward. The 9.8 million pesos divided by the exchange rate yields the equivalent amount in U.S. dollars:
. This represents the anticipated payment in U.S. dollars at the current exchange rate.
However, if the exchange rate changes to 510 pesos/US$ at the time of payment, the calculation is adjusted accordingly. In this case,
results in approximately $19,215. The fluctuation in the exchange rate impacts the final amount received by the U.S.-based company, reflecting the importance of monitoring and considering currency exchange dynamics in international transactions.
Exchange rate movements can have financial implications for businesses engaged in cross-border transactions. The variation from the initial estimate emphasizes the need for companies to assess and manage foreign exchange risks effectively to mitigate potential financial impacts.
The complete question is:
"Your U.S.-based company is selling parts to a company in Chile, and the agreement stipulates that the Chilean company will pay you 9.8 million pesos in 3 months. The current exchange rate is 490 pesos/US$. If the exchange rate at the time of payment is 510 pesos/US$, how does this potential change in the exchange rate impact the U.S.-based company's expected revenue in U.S. dollars?"