Stover Corporation, a U

question 30

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 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 francs. If the spot rate in 90 days is actually 1.638 francs, how much will the U.S. firm have saved or lost in U.S. dollars by hedging its exchange rate exposure?

• A) -$396
• B) -$243
• C) $0
• D) $243
• E) $638

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Definitions:

Hyperopia

A vision condition, also known as farsightedness, in which distant objects can be seen more clearly than near objects.

Myopia

A vision condition characterized by the ability to see objects close to the eye clearly while distant objects appear blurred.

Color Blindness

A visual impairment that affects the ability to perceive colors accurately or differentiate between certain colors.

Conjunctivitis

An inflammation of the conjunctiva, the clear lining of the white part of the eye and the inside of the eyelids, often referred to as "pink eye."