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Sagot :
Answer:
Profit (loss) from the contract = (FER2 - FER1) million yen
Explanation:
Let FER1 represents the forward exchange rates for the contracts entered into by the company on July 1, 2013, and let FER2 represents the forward exchange rates for the contracts entered into by the company on September 1, 2013.
Also, let SPOT represents the spot rate on January 1, 2014.
Since all exchange rates are measured as yen per dollar, we therefore have:
First contract profit = (SPOT - FER1) million yen
Second contract profit = (FER2 - SPOT) million yen
Profit (loss) from the contract = First contract profit + Second contract profit
Removing the million yen first and later add to the final answer, we have:
Profit (loss) from the contract = (SPOT - FER1) + (FER2 - SPOT)
Profit (loss) from the contract = SPOT - FER1 + FER2 - SPOT
Profit (loss) from the contract = (FER2 - FER1) million yen
Therefore, the profit or loss the company will make in dollars as a function of the forward exchange rates on July 1, 2013 and September 1, 2013 is Profit (loss) from the contract = (FER2 - FER1) million yen.
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