Purple Whale Foodstuffs Inc., a U.S. company, produces and exports industrial machinery overseas. It recently made a sale to a Japanese manufacturing firm for ¥675 million, but the Japanese firm has 60 days before it must make the payment to Purple Whale Foodstuffs Inc. The spot exchange rate is ¥132.78 per dollar, and the 60-day forward rate s ¥134.72 per dollar. Is the yen selling at a premium or at a discount in the forward market relative to the U.S. dollar? The yen is trading at a discount in the forward market. In the forward market, the yen is trading at a premium. f the customer pays Purple Whale Foodstuffs Inc. the ¥675 million today, how much will Purple Whale Foodstuffs Inc. receive in dollars? $5.84 million $5.33 million $4.83 million $5.08 million Assuming that the forward market is correct and the spot exchange rate in 60 days will equal the 60-day forward exchange rate today, Purple Whale Foodstuffs Inc. would get more dollars if the Japanese firm paid off its account

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Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.