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Determine the sterling amount that the firm will pay

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Question - A firm in the UK has agreed to buy goods from an importer in the USA at an invoiced price of $250,000. Of this amount, $100,000 will be payable on shipment, $75,000 one month after shipment and $75,000 three months after shipment. The quoted foreign exchange rates ($ per £) at the date of shipment are as follows.

Spot 1.390 - 1.392

One month 1.387 - 1.390

Three months 1.380 - 1.384

The firm decides to enter into appropriate forward exchange contracts through its bank to hedge these transactions. Determine the sterling amount that the firm will pay?

Reference no: EM133028215

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