Hanson Corp

question 10

Multiple Choice

Hanson Corp.frequently uses a forward hedge to hedge its British pound (£) payables.For the next quarter,Hanson has identified its net exposure to the pound as being £1,000,000.The 90-day forward rate is $1.50.Furthermore,Hanson's financial center has indicated that the possible values of the British pound at the end of next quarter are $1.57 and $1.59,with probabilities of.50 and.50,respectively.Based on this information,what is the expected real cost of hedging payables

• A) $80,000.
• B) -$80,000.
• C) $1,570,000.
• D) $1,580,000.

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Definitions:

Nuts

Edible seeds enclosed in a hard shell, often used as a source of nutrients and energy.

Berries

Small, pulpy, and often edible fruits, typically consumed fresh, frozen, or in various prepared foods and beverages.

Perfect Substitute

A perfect substitute is a good or service that can be used in exactly the same way as another, meaning consumers are indifferent between the two.

Utility Function

A mathematical representation that ranks individuals' preferences or satisfaction derived from consuming goods and services.