question 3

G e ance 2 Hashcards X + ard.com/webapps/assessment/take/launchjsp?course_assessment_id=23310_18.course_id=_24699.18.content id=5733221&step=null Remaining Time: 1 hour, 08 minutes, 25 seconds. Question Completion Status: Der has signed the Torward contract so it cannot cancer the position in anyway Dell can cancel its position by taking a short position in a new forward contract on 20 millions with the same delivery date in December 2018 QUESTION 3 Assume that a U.S. investor invests in a British CD offering a six-month interest rate of 2%, Over this six-month period, the pound depreciates by 10%. The effective yield on the British CD for the U.S. investor is -4.45% 8.00% 12.00% -8.20%. QUESTION 4 Larado Corp. frequently uses a forward hedge to hedge its British pound () payables. For the next quarter, Larado has identified its net exposure to the pound as being 1,000,000. The 90-day forward rate is $1.40. Furthermore, Larado's financial center has indicated that the possible values of the British pound at the end of next quarter are $1.47 and 51.48, with probabilities of .50 and .50, respectively. Based on this information, what is the expected real cost of hedging payables? $80,000