Study Questions (Ch 11) Back to Assignment Attempts Average/2 12. Study Questions #12. Ch 11. Suppose the spot rate of the pound today is $1.65 and the three month forward rate is $1.67. Complete the following sentence to explain how a U.S. importer who has to pay 18,000 pounds in three months can hedge the foreign exchange risk The U.S. importer can cover foreign exchange risk by purchasing 19,000 for three month delivery at $1.67 per pound. In order to do that, the importer has to be willing to pay $0.02 more per pound than today's spot rate to guard against the possibility that the spot rate in three months will than $1.65 per pound. In three months, when her payments are due, the importer will pay S and get 18,000 needed for payment. V what the pound's spot rate is at that time. be What occurs if the U.S. importer does not hedge, and the spot rate of the pound in three months is $1.70 per pound? The importer must pay $29,700 for the E18,000, which is less than the cost she would have incurred by hedging. The importer must pay $30500 for the E18,000, which is less than the cost she would have incurred by hedging. O The importer must pay $30,600 for 18,000, which exceeds the cost she would have incurred by hedging. The importer must pay $29,700 for the E18,000, which exceeds the cost she would have incurred by hedging. Suppose the spot rate of the pound today is $1.65 and the three-month forward rate is $1.67. Complete the following sentence to explain how a U.S. importer who has to pay 18,000 pounds The U.S. importer can cover foreign exchange risk by purchasing 18,000 for three-month delive importer has to be willing to pay $0.02 more per pound than today's spot rate to guard against t be than $1.65 per pound. In three months, when her payments are due, the import ayment, what the pound's spot rate is at that time. lower nes WH higher if the U.S. importer does not hedge, and the spot rate of the pound in three month O The importer must pay $29,700 for the E18,000, which is less than the cost she would + The importer must pay $30,600 for the E18,000, which is less than the cost she would h The importer must pay $30,600 for 18,000, which exceeds the cost she would have inci mplete the following sentence to explain how a U.S. importer who has to pay 18,000 pounds e U.S. importer can cover foreign exchange risk by purchasing 18,000 for three-month deliv porter has to be willing to pay $0.02 more per pound than today's spot rate to guard against V than $1.65 per pound. In three months, when her payments are due, the impor eeded for payment, what the pound's spot rate is at that time. irrespective of hat occurs if the U.S not hedge, and the spot rate of the pound in three monti depending on O. The importel Joo for the 18,000, which is less than the cost she would The importer must pay $30,600 for the 18,000, which is less than the.cost she would 0 The importer must pay $30,500 for 18,000, which exceeds the cost she would have ind The importer must pay $29,700 for the 18,000, which exceeds the cost she would have