Suppose You Own a Portfolio of British Securities Valued at $430,000

question 74

Multiple Choice

Suppose you own a portfolio of British securities valued at $430,000. The exchange rate is currently at $1 = £0.57. A currency contract on British pounds is set at 62,500 pounds. How many contracts must you purchase to protect your portfolio from exchange rate risk?

• A) 1
• B) 2
• C) 3
• D) 4

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Definitions:

Pectoralis Major

A significant muscle located in the upper part of the chest that helps with shoulder and arm movements.

Deltoid

A sizable, three-sided muscle enveloping the shoulder joint tasked with raising the arm and providing the shoulder with its mobility.

Biceps Brachii

A large muscle of the upper arm responsible for flexing the elbow and rotating the forearm, well known for its two heads or points of origin.

Serratus Anterior

A muscle located on the side of the chest that assists in the upward movement of the arm and in breathing.