Use the Following Information to Calculate the Dollar Cost of Using

Use the following information to calculate the dollar cost of using a money market hedge to hedge 200,000 pounds of payables due in 180 days. Assume the firm has no excess cash. Assume the spot rate of the pound is $2.02, the 180-day forward rate is $2.00. The British interest rate is 5%, and the U.S. interest rate is 4% over the 180-day period.

A) $391,210.
B) $396,190.
C) $388,210.
D) $384,761.
E) none of the above

Correct Answer:

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