Stover Corporation,a U

question 42

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 1.615 Swiss francs,how much in U.S.dollars will the U.S.firm have saved or lost by hedging its exchange rate exposure? Do not round the intermediate calculations and round the final answer to the nearest cent.

• A) $1,212.29
• B) $926.47
• C) $985.60
• D) $965.89
• E) $916.61

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Definitions:

Low Productivity

A state where there is a lower output per unit of input, which may lead to decreased economic performance.

Education

The systematic process of facilitating learning, acquisition of knowledge, skills, values, beliefs, and habits.

Developing Countries

Nations with a lower level of material well-being, industrialization, and economic development compared to developed countries.

Developed Countries

Nations with high levels of economic productivity, advanced infrastructure, and higher standards of living.