Gce Model Questions Vol1 2021 Commerce Question 19

Practice objective / multiple choice question 19 from the 2021 Gce Model Questions Vol1 Commerce examination.

Gce Model Questions Vol1 2021 Commerce Objective / Multiple Choice Medium Difficulty
Question 19 GCE_MODEL_QUESTIONS_VOL1 • 2021 • COMMERCE • objective

An exporter sells goods worth €200,000. The spot exchange rate is \(\text{₦}560\) per €. A bank offers a 90‑day forward contract at \(\text{₦}570\) per € but charges a commission of \(0.5\%\) on the euro amount. Compare the net naira amount the exporter would receive (i) if the payment is taken now at the spot rate, and (ii) if the forward contract is used. Which option yields a higher naira receipt?

Answer Options

A. Spot: \(\text{₦}112,000,000\); Forward: \(\text{₦}111,500,000\); spot rate yields more.
Correct Answer B. Spot: \(\text{₦}112,000,000\); Forward: \(\text{₦}113,430,000\); forward contract yields more.
C. Spot: \(\text{₦}112,000,000\); Forward: \(\text{₦}113,430,000\); spot rate yields more.
D. Spot: \(\text{₦}113,000,000\); Forward: \(\text{₦}113,430,000\); forward contract yields more.
Correct Answer
B
Correct Option:
Spot: \(\text{₦}112,000,000\); Forward: \(\text{₦}113,430,000\); forward contract yields more.

About This Question

This is Gce Model Questions Vol1 2021 Commerce Question 19. It is one of the objective questions from the 2021 Gce Model Questions Vol1 Commerce examination.

Difficulty level: Medium .

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