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

---

Definitions:

Ripples

Small, wave-like ridges on a surface, typically formed by the action of water or wind on sand, sediment, or other fine particles.

Glacier Evidence

Physical features left in the landscape that indicate past or present presence of glaciers, such as moraines, glacial valleys, and striations.

Arête

A sharp, narrow ridge found in glaciated or high mountain terrain, formed by the erosion of two glaciers from opposite sides.

U-Shaped Valley

A valley with a distinct U-shaped cross-section, typically formed by glacial erosion.