American Airlines hedges a £2.5 million receivable by selling pounds forward.If the spot rate is £1 = $1.73 and the 90-day forward rate is $1.7158,what is American's cost of hedging?
A) $142,000
B) $35,500
C) $8,875
D) it is unknown at the time American enters into its hedge
Correct Answer:
Verified
Q30:
In 1995,Ajax Manufacturing's German subsidiary has the
Q31: In 1993,Ford simultaneously borrows Spanish pesetas at
Q32: Dell Computer has a £1 million receivable
Q33: Suppose the English subsidiary of a U.S.firm
Q34: Suppose markets are efficient,there are no taxes,and
Q36: Suppose the German subsidiary of a U.S.firm
Q37: Suppose that the spot rate and the
Q38: On March 1,1998,Bechtel submits a franc-denominated bid
Q39:
In 1995,Ajax Manufacturing's German subsidiary has the
Q40: If you fear the dollar will rise
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents