In June 2016,the Spot Exchange Rate for the British Pound

question 37

Multiple Choice

In June 2016,the spot exchange rate for the British Pound was $1.4255/£ .Suppose that at the same time Luther Industries entered into a contract to purchase goods with a price of £400,000 to be delivered in one year.There is a one-year option call contract available to Luther which will allow the company to purchase £10,000 for $1.50/£.If Luther purchases 40 option contracts,and the spot rate at the time the contract is due is $1.8725/£,how much will Luther pay for the goods?

• A)$570,200.00
• B)$266,666.70
• C)$600,000.00
• D)$749,000.00

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Definitions:

Cumulative

An adjective describing quantities or changes that are added together sequentially over time.

Corporate Capital Structure

Refers to the mix of different types of securities issued by a corporation to finance its operations, typically involving a combination of debt and equity.

Simple

Easily understood or done; presenting no difficulty, often referred to in the context of simple interest or simple calculations.