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Which of the following statements is correct for a U.S. importing firm that owes GBP 1,000,000 payable in three months? Assume the company's WACC is
Which of the following statements is correct for a U.S. importing firm that owes GBP 1,000,000 payable in three months? Assume the company's WACC is 12% p.a. and the U.K. deposit rates are 8% p.a. The current spot rate is USD1.45/GBP and the 3-month forward rate is USD1.50/GBP. The U.S. importer can lock the payable at the cost at USD 1,412,338 using money markets The U.S. importer can lock the payable at the cost of USD 1,450,000 using a forward contract The forward hedge is more expensive than the money market hedge for the importer Using a money market hedge, the U.S. importer needs to invest GBP 1,000,000 today The U.S. importer can lock the payable at the cost at USD 1,464,216 using money markets
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