Hanson Corp

Hanson Corp.frequently uses a forward hedge to hedge its British pound (£) payables.For the next quarter,Hanson has identified its net exposure to the pound as being £1,000,000.The 90-day forward rate is $1.50.Furthermore,Hanson's financial center has indicated that the possible values of the British pound at the end of next quarter are $1.57 and $1.59,with probabilities of.50 and.50,respectively.Based on this information,what is the expected real cost of hedging payables

A) $80,000.
B) -$80,000.
C) $1,570,000.
D) $1,580,000.

Correct Answer:

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