In December 2005,the Spot Exchange Rate for the British Pound

In December 2005,the spot exchange rate for the British Pound was $1.7188/£ and the one-year forward rate was $1.8675/£.Suppose that at the same time Luther Industries entered into a contract to purchase goods with a price of £375,000 to be delivered in one year.Simultaneously Luther entered into a one-year forward contract to purchase £375,000.At the time the contract payment was due,the spot exchange rate was $1.9975/£.What is the amount of the payment in U.S.dollars that Luther Industries paid?

A) $700,312.50
B) $644,550.00
C) $749,062.50
D) $200,803.20

Correct Answer:

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