Situation Consider a U.S. company that has imported some merchandise from the UK and will have to pay 100,000 three months from now (account payable). Assuming that this represents an overall net liability position in pounds, the company is exposed to exchange-rate risk. The company does not know the dollar value of its liability because it does not know the spot exchange rate that will exist 90 days from now. One way to hedge its risk exposure is to enter into a forward contract to buy 100,000 in 90 days at the current forward rate is $1.6745/. Requirement Calculate how many U.S. dollars the company will pay for 100,000 in 90 days at the current forward rate is $1.6745/. Show the formula, do the math, and indicate the unit of measurement.

Consider a U.S. company that has imported some merchandise from the UK and will have to pay 100,000 three months from now (account payable). Assuming that this represents an overall net liability position in pounds, the company is exposed to exchange-rate risk. The company does not know the dollar value of its liability because it does not know the spot exchange rate that will exist 90 days from now. One way to hedge its risk exposure is to enter into a forward contract to buy 100,000 in 90 days at the current forward rate is $1.6745/. Requirement Calculate how many U.S. dollars the company will pay for 100,000 in 90 days at the current forward rate is $1.6745/E. Show the formula, do the math, and indicate the unit of measurement