Hedging: Tamcon Industries has purchased equipment from a Brazilian firm for a total cost of 1,272,500 Brazilian reals (BR) . The firm has to pay in 30 days. Citicorp has given the firm a 30-day forward quote of $0.6123/real. Assume that on the day the payment is due, the spot rate is at $0.6317/BR. How much would Tamcon save by hedging with a forward contract? Round to the nearest dollar.
A) $24,687
B) $803,838
C) $779,152
D) $31,278
Correct Answer:
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