(Answered) Questionjo - lo ltd a south african exporter sells car

Accounting

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Jo - Lo Ltd, a South African exporter, sells car parts to the value of €150 000 (Euro dollars) on 1 July 2013 to a company in Italy. Payment is made to Jo - Lo on 1 August 2013. The following information is available:

Price in €	Exchange rate	Price in R
I July 2013	€150 000	€1 = R14.25	R2 137 500
1 August 2013	€150 000	Unknown	Unknown

The forward Rand to € rate is trading at a Rand discount of 20% per annum.

Required:

Jo - Lo wants to take out forward cover. Calculate the forward rate and the value of the transaction as at 1 August 2013. Round to four decimal places.

Describe the effect on the transaction if on 1 August 2013 the R/€ rate is € 1 = 14.70 and Jo - Lo never entered into any forward cover contract.

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