Gce Model Questions Vol1 2020 Commerce Question 29

Practice objective / multiple choice question 29 from the 2020 Gce Model Questions Vol1 Commerce examination.

Gce Model Questions Vol1 2020 Commerce Objective / Multiple Choice Hard Difficulty
Question 29 GCE_MODEL_QUESTIONS_VOL1 • 2020 • COMMERCE • objective

An exporter is to receive payment under a documentary collection for an invoice of US\$50,000. The buyer's bank charges a discount fee of 0.5 % of the invoice amount and a fixed handling fee of US\$200. The exporter arranges a forward contract to convert the proceeds at a rate of \(₦415\) per US\$.\n\n(a) Calculate the net amount in Naira the exporter will receive after the discount and forward conversion.\n(b) If the exporter instead waits for the buyer to pay the full amount after 30 days and converts at the spot rate of \(₦425\) per US\$, what is the Naira amount received?\n(c) Which option yields the higher Naira receipt?

Answer Options

A. Waiting for spot payment gives higher receipt: ₦21,200,000 (vs ₦20,563,250 under discount)
B. Waiting for spot payment gives higher receipt: ₦21,250,000 (vs ₦20,500,000 under discount)
C. Waiting for spot payment gives higher receipt: ₦21,300,000 (vs ₦20,563,250 under discount)
Correct Answer D. Waiting for spot payment gives higher receipt: ₦21,250,000 (vs ₦20,563,250 under discount)
Correct Answer
D
Correct Option:
Waiting for spot payment gives higher receipt: ₦21,250,000 (vs ₦20,563,250 under discount)

About This Question

This is Gce Model Questions Vol1 2020 Commerce Question 29. It is one of the objective questions from the 2020 Gce Model Questions Vol1 Commerce examination.

Difficulty level: Hard .

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