Suppose IBM receives quotes of USD0.008170–7 for the Japanese Yen (JPY). What is the JPY value to IBM of buying USD 5 million?
Question 2Answer

a.
JPY611,995,104.04

b.
JPY611,471,199.71

c.
There is not enough information in this question

d.
More than one of these options

e.
JPY611,733,151.85

To calculate the Japanese Yen (JPY) value to IBM of buying USD 5 million, we need to consider the **ask price** (the higher price in the quote) for JPY/USD, because IBM will be buying USD and paying JPY.

The quote for the Japanese Yen (JPY) is **USD 0.008170–7**. The ask price is **0.008170 USD/JPY**.

### Steps:

1. **Identify the amount in USD to be bought**:
   - IBM wants to buy USD 5 million (USD 5,000,000).
   
2. **Use the ask price (0.008170 USD/JPY)** to find how much JPY IBM needs to spend to get USD 5 million:
   \[
   \text{JPY Value} = \frac{\text{USD to be bought}}{\text{Ask Price (USD/JPY)}}
   \]
   \[
   \text{JPY Value} = \frac{5,000,000}{0.008170} = 611,995,104.04 \, \text{JPY}
   \]

Thus, the JPY value to IBM of buying USD 5 million is **JPY 611,995,104.04**.

### Answer:
The correct choice is **a. JPY 611,995,104.04**.

Would you like further details on the calculation or a different explanation?

Here are 5 related questions:
1. How do bid-ask spreads impact currency transactions?
2. How does currency exchange affect multinational companies like IBM?
3. What factors influence foreign exchange rates?
4. How can IBM hedge against unfavorable exchange rates?
5. How are foreign exchange quotes structured in currency markets?

**Tip:** Always ensure you use the correct side of the quote (bid or ask) when dealing with buying or selling in foreign exchange transactions.

Suppose IBM receives quotes of USD0.008170–7 for the Japanese Yen (JPY). What is the JPY value to IBM of buying USD 5 million?

Explore how IBM calculates the JPY value when buying USD 5 million at a quoted price of USD 0.008170–7 for the Japanese Yen. This finance problem demonstrates currency conversion using the ask price and the impact of bid-ask spreads in foreign exchange markets.

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