Suppose That the Spot Rate and the 90?day Forward Rate

question 24

Multiple Choice

Suppose that the spot rate and the 90?day forward rate on the pound sterling are $and $respectively. Your company, wishing to avoid foreign exchange risk, sells £500,000 forward 90 days. Assuming that the spot rate remains the same 90 days hence, your company would

• A) receive £500,000 90 days hence
• B) receive more than £500,000 in 90 days
• C) have been better off not to have sold pounds forward
• D) receive nothing

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