5. 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.

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.

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