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:

Anti-war Movement

Social movements, typically during periods of military conflict, that advocate for peace and are against the initiation or continuation of armed conflict.

Vietnam War

A prolonged conflict (1955-1975) between communist forces in North Vietnam, supported by its allies, and the government of South Vietnam, backed by the United States.

President Kennedy

John F. Kennedy, the 35th President of the United States, served from January 1961 until his assassination in November 1963.

Civil Rights Movement

A decades-long struggle, primarily during the 1950s and 1960s, by African Americans to end racial discrimination and gain equal rights under the law in the United States.