Your company will receive C$600,000 in 90 days. The 90-day forward rate in the Canadian dollar is £0.47. If you use a forward hedge, you will (to the nearest £):
A) receive £750,000 today.
B) receive £750,000 in 90 days.
C) pay £1,276,595 in 90 days.
D) receive £1,276,595 in 90 days.
E) receive £282,000 in 90 days.

Question

Quizplus · Accepted Answer

To hedge using the forward rate, multiply the amount in Canadian dollars by the forward rate: C$600,000 * £0.47 = £282,000.

Your Company Will Receive C$600,000 in 90 Days