Graylon ltd, based in Durham, exports products to a German firm and will receive payment of €200,000 in three months. On June 1, the spot rate of the euro was £0.90, and the 3-month forward rate was £0.89. On June 1, Graylon negotiated a forward contract with a bank to sell €200,000 forward in three months. The spot rate of the euro on September 1 is £0.92. Graylon will receive £ ____ for the euros.
A) 179,000
B) 178,000
C) 180,000
D) 181,000

Question

Quizplus · Accepted Answer

Graylon locked in the forward rate of £0.89 per euro, so they will receive €200,000 * £0.89 = £178,000.

Graylon Ltd, Based in Durham, Exports Products to a German