Use the Following Information to Calculate the Pound Cost of Using

question 36

Multiple Choice

Use the following information to calculate the pound cost of using a money market hedge to hedge $200,000 of payables due in 360 days. Assume the firm has no excess cash. Assume the spot rate of the dollar is £0.55, the 360-day forward rate is £0.54. The British interest rate is 5%, and the US interest rate is 4% over the 360-day period.

• A) £191,210
• B) £196,190
• C) £188,210
• D) £184,761
• E) None of the above

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Definitions:

Nyctalopia

Night blindness, a condition making it difficult or impossible to see in low light or darkness.

Nyctal

Relating to the night; often used in the context of nyctalopia, or night blindness.

Radial Keratotomy

A surgical procedure to correct myopia (nearsightedness) by making radial incisions in the cornea to flatten it.

Photocoagulation

A medical procedure that uses light (usually a laser) to coagulate tissue, often used in treating various eye conditions, including retinal disorders.