Question
You have decided to use June futures to hedge the risk of a purchase of British Pound (BP). The purchase will be for 125,000 BP
You have decided to use June futures to hedge the risk of a purchase of British Pound (BP). The purchase will be for 125,000 BP and will take place on May 1. The current spot price for BP is $1.43 per BP and the current June futures BP price is $1.49 per BP.
If the spot rate prevailing on May 1 is $1.55 per BP and the June futures price on May 1 is $1.59 per BP, then the effective U.S. Dollar cost to you of buying 125,000 BP (include any costs or benefits from hedging) is closest to
Group of answer choices
A) $206,250
B) $181,250
C) $193,750
D) $169,000
You have decided to use June futures to hedge the risk of a purchase of British Pound (BP). The purchase will be for 125,000 BP and will take place on May 1. The current spot price for BP is $1.43 per BP and the current June futures BP price is $1.49 per BP.
If the spot rate prevailing on May 1 is $1.39 per BP and the June futures price on May 1 is $1.44 per BP, then the effective U.S. Dollar cost to you of buying 125,000 BP (include any costs or benefits from hedging) is closest to
Group of answer choices
A) $180,000
B) $193,750
C) $179,250
D) $207,500
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