EECS 1530 Lecture Notes - Lecture 32: Belgo
21 Jun 2018
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EECS 1530 Lecture 32 Notes
Introduction
Belgian supplier
Idiaa Co. purhases supplies pried at , euros € fro Belgo, a Belgia
supplier, on the first day of every month.
Indiana instructs its bank to transfer funds from its account to Belgo’s account on the
first day of each month.
It only has dollars in its account, whereas Belgo’s account balance is denominated in
euros.
When payment was made last month, the euro was worth $1.08
Hee Idiaa Co. eeded $8, to pa for the supplies €, $.8 ¼
$108,000).
The bank reduced Indiana ’s account balance by $108,000, which was exchanged at the
ak for €,.
The ak the set the €, eletroiall to Belgo by increasing Belgo’s account
alae €,.
Today, a new payment needs to be made.
The euro is currently valued at $1.12, so the bank will reduce Indiana’s account balance
$, €, $. ¼ $, ad ehage it for €,, which will be
sent electronically to Belgo.
In this way, the bank not only executes the transactions but also serves as the foreign
exchange dealer.
Each month the bank receives dollars from Indiana Co. in exchange for the euros it
provides.
In addition, the bank facilitates other transactions for MNCs in which it receives euros in
exchange for dollars.
The bank maintains an inventory of euros, dollars, and other currencies to facilitate
these foreign exchange transactions.
Document Summary
I(cid:374)dia(cid:374)a co. pur(cid:272)hases supplies pri(cid:272)ed at (cid:1005)(cid:1004)(cid:1004),(cid:1004)(cid:1004)(cid:1004) euros (cid:894) (cid:895) fro(cid:373) belgo, a belgia(cid:374) supplier, on the first day of every month. Indiana instructs its bank to transfer funds from its account to belgo"s account on the first day of each month. The bank reduced indiana "s account balance by ,000, which was exchanged at the (cid:271)a(cid:374)k for (cid:1005)(cid:1004)(cid:1004),(cid:1004)(cid:1004)(cid:1004). The (cid:271)a(cid:374)k the(cid:374) se(cid:374)t the (cid:1005)(cid:1004)(cid:1004),(cid:1004)(cid:1004)(cid:1004) ele(cid:272)tro(cid:374)i(cid:272)all(cid:455) to belgo by increasing belgo"s account (cid:271)ala(cid:374)(cid:272)e (cid:271)(cid:455) (cid:1005)(cid:1004)(cid:1004),(cid:1004)(cid:1004)(cid:1004). The euro is currently valued at . 12, so the bank will reduce indiana"s account balance (cid:271)(cid:455) (cid:1005)(cid:1006),(cid:1004)(cid:1004)(cid:1004) (cid:894) (cid:1005)(cid:1004)(cid:1004),(cid:1004)(cid:1004)(cid:1004) . (cid:1005)(cid:1006) (cid:1005)(cid:1006),(cid:1004)(cid:1004)(cid:1004)(cid:895) a(cid:374)d e(cid:454)(cid:272)ha(cid:374)ge it for (cid:1005)(cid:1004)(cid:1004),(cid:1004)(cid:1004)(cid:1004), which will be sent electronically to belgo. In addition, the bank facilitates other transactions for mncs in which it receives euros in exchange for dollars. The bank maintains an inventory of euros, dollars, and other currencies to facilitate these foreign exchange transactions.
