Your Firm Has a British Customer That Is Willing to Place

question 80

Multiple Choice

Your firm has a British customer that is willing to place a $1 million order, but wants to pay in pounds instead of dollars. The spot exchange rate is $1.85 = £1.00 and the one-year forward rate is $1.90 = £1.00. The lead time on the order is such that payment is due in one year. What is the fairest exchange rate to use?

• A)$1.85 = £1.00
• B)$1.8750 = £1.00
• C)$1.90 = £1.00
• D)none of the above

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