Use the Information for the Question(s)below

question 36

Multiple Choice

Use the information for the question(s) below.
You are a U.S.investor who is trying to calculate the present value (PV) 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%.
-You are a U.S.investor who is trying to calculate the present value (PV) of £15 million cash inflow that will occur one year from now.The spot exchange rate is $1.5742/£ and the forward rate is F₁ = $1.5682/£.The appropriate dollar discount rate for this cash flow is 1.05% and the appropriate £ discount rate is 1.45%.What is the present value of the dollar cash inflow computed by first converting the £ into dollars and then discounting the dollars?

• A)$23,275,505
• B)$23,186,792
• C)$23,367,640
• D)$23,278,575

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Definitions:

Polygyny

A form of marriage in which a man is allowed to have more than one wife at the same time.

Polyandry

A form of marriage in which a woman has two or more husbands at the same time.

Monogamy

One person is married exclusively to another person.

Exclusively Married

A state or condition in which individuals are married and do not engage in marital relationships with anyone else.