Stover Corporation,a U

question 29

Multiple Choice

Stover Corporation,a U.S.based importer,makes a purchase of crystal glassware from a firm in Switzerland for 39,960 Swiss francs,or $24,000,at the spot rate of 1.665 Swiss francs per dollar.The terms of the purchase are net 90 days,and the U.S.firm wants to cover this trade payable with a forward market hedge to eliminate its exchange rate risk.Suppose the firm completes a forward hedge at the 90-day forward rate of 1.682 Swiss francs.If the spot rate in 90 days is actually 1.64 Swiss francs,how much in U.S.dollars will the U.S.firm have saved or lost by hedging its exchange rate exposure?

• A)$399
• B)$444
• C)$493
• D)$548
• E)$608

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Definitions:

Roman Catholicism

The largest branch of Christianity, led by the Pope, with distinctive doctrines, practices, and organizational structures.

Spanish Dominions

Territories that were under the rule of the Spanish monarchy, encompassing vast areas in the Americas, Asia, Africa, and Europe at various times from the late 15th to the early 19th centuries.

Semantic Encoding

The process of encoding sensory input that has particular meaning or can be applied to a context, rather than merely being remembered as a visual or auditory stimulus.

Mnemonic

A memory aid, often a word, phrase, or visual image, designed to help remember information or a concept.