Suppose You Own a Portfolio of British Securities Valued at $430,000

question 74

Multiple Choice

Suppose you own a portfolio of British securities valued at $430,000. The exchange rate is currently at $1 = £0.57. A currency contract on British pounds is set at 62,500 pounds. How many contracts must you purchase to protect your portfolio from exchange rate risk?

• A) 1
• B) 2
• C) 3
• D) 4

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Definitions:

SCOR Process

A model used to evaluate and improve supply chain performance, covering key aspects such as planning, sourcing, manufacturing, delivery, and returns.

Stockout

A situation where items are unavailable in inventory, leading to potential lost sales or customer dissatisfaction.

Extra Shipping Costs

Additional charges incurred during the shipping process, which may include fees for expedited delivery, handling of hazardous materials, or oversized packages.

Cost of Capital

The cost of funds used for financing a business, represented by the interest rate paid on debt or the rate of return required by equity investors.