You Are an Australian Investor Who Is Trying to Calculate

question 35

Multiple Choice

You are an Australian 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 £ cash inflow computed by first discounting the £ and converting them into dollars?

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

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