Use the Information for the Question(s)below

question 1

Multiple Choice

Use the information for the question(s) below.
You are a U.S.investor who is trying to calculate the present value of £5 million cash inflow that will occur one year in the future.The spot exchange rate is S = $1.8839/£ and the forward rate is F1 = $1.8862/£.The appropriate dollar discount rate for this cash flow is 5.32% and the appropriate £ discount rate is 5.24%.
-The present value of the £5 million cash inflow computed by first discounting the £s and then converting into dollars is closest to:

• A)$8,961,420.
• B)$8,950,495.
• C)$8,954,615.
• D)$8,943,695.

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Definitions:

Legal Scholars

Experts or academics specializing in the study, interpretation, and teaching of law.

Euro

The official currency of the eurozone, which is used by 19 of the 27 European Union countries, and is one of the world's major currencies.

Currency Exchange Rates

The value of one currency for the purpose of conversion to another, indicating how much of one currency can be exchanged for another currency.

European Union

A political and economic union of 27 member states that are located primarily in Europe, aiming to ensure free movement of goods, capital, services, and labor.