What Is the Cost of Hedging a 2 Million Euro

question 53

Multiple Choice

What is the cost of hedging a 2 million euro commitment if the spot rate is USD1.60 = EUR1,the forward rate is USD1.55 = EUR1,and the spot rate is not expected to change before payment becomes due?

• A) $0
• B) $25,000
• C) $40,323
• D) $36,667

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Definitions:

Ending Inventory

The cumulative worth of all products a company holds in inventory at the conclusion of a financial period.

Beginning Inventory

The value of all inventory held by a company at the start of an accounting period, before any purchases or sales have occurred.

Accounts Receivable Turnover

A financial ratio measuring how many times a company collects its average accounts receivable balance within a certain period.

Average Accounts Receivable

An accounting metric that represents the average amount of money owed to a company by its customers over a specific time period.