How do I solve this?

Question

A Portuguese importer bought 100 kg Swiss chocolate for 10CHF/kg on the 19th December 2014. He sold the chocolate for Christmas in Lisbon with a 30% markup. The payment to the chocolate factory was due on January 30th 2015.

Find the respective CHF/EUR ( base is CHF) exchange rates (round to two digits) and calculate the difference in the profits of the importer paying at January 30th 2015 compared to the profit the importer would have made if he had paid immediately.

Answer 1

This is problem dealing with profit/loss on account of exchange rate variations in cross currency transactions.

The approx CHF to EUR exchange rate in Dec 2014 was 1 CHF=0.83 EUR. The same changed to approx 1CHF=1.01 EUR in Jan 2015.

The Portuguese importer has to pay for 100kg of chocolate at 10CHF per kg. If he had paid in Dec 2014, he would have paid 100*10*0.83 EUR= 830 EUR. If the same is paid in Jan 2015 at the prevailing exchange rate, he would need to pay 100*10*1.01= 1010 EUR.

Thus the importer would have made an additional profit of 1010 - 830 = 180 EUR if he paid immediately rather than in Jan 2015.