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

question 29

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 call option 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 $1.3465/£,how much will Luther pay for the goods?

• A)$570,200.00
• B)$538,600.00
• C)$600,000.00
• D)$749,000.00

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Definitions:

Standard Deviations

A statistical measure indicating the dispersion or spread of a set of numbers from their mean; it shows how much variation there is from the average.

Independent

Not influenced by or subject to another, capable of thinking or acting for oneself.

Standard Deviations

An estimator of the dispersion level or variability in a sequence of numbers.

Independent

A term indicating that two variables or events have no association and the occurrence of one does not affect the probability of occurrence of the other.