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 £ cash inflow computed by first discounting the £ and converting them into dollars?

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

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Definitions:

Intrapersonal Skills

The abilities related to understanding and managing one's own emotions, motivations, and behaviors for effective self-regulation and personal growth.

Practical Ability

The capability to efficiently apply knowledge and skills to perform tasks or solve problems in real-world situations.

Caring Leader

A leader who demonstrates empathy and concern for the well-being of their team members, fostering a supportive and positive work environment.

Business Together

Collaborating or partnering with other businesses or individuals for mutual benefit and to achieve common goals.