In June 2016,the Spot Exchange Rate for the British Pound

In June 2016,the spot exchange rate for the British Pound was $1.4255/£ .Suppose that at the same time Luther Industries entered into a contract to purchase goods with a price of £400,000 to be delivered in one year.There is a one-year option call contract available to Luther which will allow the company to purchase £10,000 for $1.50/£.If Luther purchases 40 option contracts,and the spot rate at the time the contract is due is $1.8725/£,how much will Luther pay for the goods?

A) $570,200.00
B) $266,666.70
C) $600,000.00
D) $749,000.00

Correct Answer:

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