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Question
An American firm sells farm equipment to a British company for ₤250,000 to be paid in 180 days. The current exchange rate is $1.98/₤. The exporter hedges its exchange rate risk by selling ₤250,000 forward 180 days at the prevailing 180-day forward exchange rate of $2.01/₤. What is the dollar amount the American firm is expected to receive in 180 days?a. $495,000
b. $502,500
c. $201,000
d. $198,000
e. ₤250,000
Answer
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