Use the Information for the Question(s) Below

question 46

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%.
-The present value (PV) 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