Hanson Corp

question 11

Multiple Choice

Hanson Corp. frequently uses a forward hedge to hedge its British pound (£) payables. For the next quarter, Hanson has identified its net exposure to the pound as being £1,000,000. The 90-day forward rate is $1.50. Furthermore, Hanson's financial center has indicated that the predicted value of the British pound at the end of the next quarter is $1.57. Based on this information, what is the expected real cost of hedging payables?

• A) $70,000
• B) -$70,000
• C) $0
• D) $1,570,000

---

Definitions:

Enforceable

A term used to describe a legal document, such as a contract or agreement, that can be upheld or compelled by law.

Assumes The Risk

A legal principle stating that a person voluntarily exposes themselves to known hazards, accepting any incurred harm or loss.

Future

In a general context, 'future' refers to the time or a period of time following the moment of speaking or writing; in finance, it often pertains to a contract to buy or sell an asset at a later date.

Exaggeration

A statement that represents something as better or worse than it really is, often used for emphasis or effect.