Real cost of Hedging Payables Assume that Suffolk Co. negotiated a for ward contract to purchase 200,000 British pounds in 90 days. The 90 -day forward rate was $1.40 per British pound. The pounds to be purchased were to be used to purchase British supplies. On the day the pounds were delivered in accordance with the forward contract, the spot rate of the British pound was $1.44. What was the real cost of Ihedging the payables for this U.S. firm?

FindFind

International Financial Management

14th Edition
Madura
Publisher: Cengage
ISBN: 9780357130698
FindFind

International Financial Management

14th Edition
Madura
Publisher: Cengage
ISBN: 9780357130698

Solutions

Chapter 11, Problem 9QA
Textbook Problem

Real cost of Hedging Payables Assume that Suffolk Co. negotiated a for ward contract to purchase 200,000 British pounds in 90 days. The 90 -day forward rate was $1.40 per British pound. The pounds to be purchased were to be used to purchase British supplies. On the day the pounds were delivered in accordance with the forward contract, the spot rate of the British pound was $1.44. What was the real cost of Ihedging the payables for this U.S. firm?

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