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