Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are an exporter of Kentucky Wildcat Sports Jerseys to the United Kindgom and you know that a Brexit vote is coming up in one

image text in transcribed

You are an exporter of Kentucky Wildcat Sports Jerseys to the United Kindgom and you know that a Brexit vote is coming up in one month and you are concerned that the outcome of the vote will not be good for the value of the British Pound. You receive all of your payments for goods sold in British Pounds and have an existing order to sell your gear to Kind Charles Sporting Goods for 500,000 pounds that is payable just after the vote. What is the best strategy for you to do as a business owner of your fears of the Brexit Vote come true? Assume the current spot rate for British Pounds is 1.3000 Multiple Choice Buy a 6 week Pound Cail so that you are covered if the price of the pound moves higher and it will be too expensive to convert pounds back to dollars Lower the price of the gear you sell King Charles Inc so that they can afford it and you will get 450,000 pounds that you can then convert back to dollars at the post Brexit exchange rate Sell a 6 week forward contract of the British Pound at 1.3200 for the amound of pounds King Charles will owe you Do nothing and hope that you are correct and the Pound moves lower and you can exchange your pounds back to dollars

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Personal Finance An Integrated Planning Approach

Authors: Ralph R Frasca

8th edition

136063039, 978-0136063032

More Books

Students also viewed these Finance questions