Solution-Did Luther benefit from the forward contract

Did Luther benefit from the forward contract

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Reference no: EM132955043

Question - In December 2005, the spot exchange rate for the British Pound was $1.7188/£ and the one-year forward rate was $1.8675/£. Suppose that at the same time a US company Luther Industries entered into a contract to purchase goods with a price of £375,000 to be delivered in one year. Simultaneously Luther entered into a one-year forward contract to purchase £375,000. At the time the contract payment was due, the spot exchange rate was $1.7975/£.

Required -

What is the amount of the payment in U.S. dollars that Luther Industries paid?

Did Luther benefit from the forward contract? Explain.

Reference no: EM132955043

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Did Luther benefit from the forward contract

Reference no: EM132955043

Reference no: EM132955043

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