While you were visiting London, you purchased a Jaguar for £35,000, payable in three months. You have enough cash at your bank in New York City, which pays 0.22% interest per month, compounding monthly, to pay for the car. Currently, the GBP/USD is 1.4580 and the three-month forward is 1.4255. In London, the money market interest rate is 2.5% for a three-month investment. You are studying the following payment method (a) Keep the funds at your bank in the U.S. and buy £35,000 forward. How much would it cost you in USD? (no cents)

While you were visiting London, you purchased a Jaguar for £35,000, payable in three months. You have enough cash at your bank in New York City, which pays 0.22% interest per month, compounding monthly, to pay for the car. Currently, the GBP/USD is 1.4580 and the three-month forward is 1.4255. In London, the money market interest rate is 2.5% for a three-month investment. You are studying the following payment method (a) Keep the funds at your bank in the U.S. and buy £35,000 forward. How much would it cost you in USD? (no cents)

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter13: Other Financing Alternatives

Section: Chapter Questions

Problem 1bM

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