The Following Information Is to Be Used in Answering Questions

question 29

Multiple Choice

The following information is to be used in answering questions 36?38.
U.S. borrowing rate for 1 year = 9.5%
U.S. deposit rate for 1 year = 8.7%
French borrowing rate for 1 year = 11.3%
French deposit rate for 1 year = 10.2%
French franc spot quote = $0.1763?78
French franc 1?year forward quote = $0.1729?47
-1996, DEC hedges a FF million receivable due in 180 days. The current spot rate is FF 1 = $0.18834 and the 180?day forward rate is FF 1 = $0.1862If the spot rate at the end of 180 days is $0.18728, how much has the forward market hedge cost DEC?

• A) $6,688
• B) $3,392
• C) $3,296
• D) DEC gains $6,688 on the hedge

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Definitions:

Glenoid Cavity

A shallow depression on the lateral surface of the scapula that articulates with the head of the humerus to form the shoulder joint.

Articulates

Joints or points of connection between bones in the skeletal system.

Humerus

The long bone in the upper arm or forelimb extending from the shoulder to the elbow.

Collar Bone

Also known as the clavicle, it is a long bone that serves as a strut between the shoulder blade and the sternum or breastbone.