Suppose You Own a Portfolio of British Securities Valued at About

question 93

Multiple Choice

Suppose you own a portfolio of British securities valued at about $500,000. The exchange rate is currently at $1 = £0.66. A currency contract on British pounds is set at 62,500 pounds. How many contracts must you purchase to protect at least 90% of your portfolio from exchange rate risk?

• A) 6
• B) 5
• C) 4
• D) 3

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