On July 1, an American auto dealer enters into a contract to purchase 20 British sports...
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On July 1, an American auto dealer enters into a contract to purchase 20 British sports cars with payment to be made in pounds on November 1. Each car costs 35,000 pounds. The dealer is concerned that the pound will strengthen over the next few months. The dealer plans to trade in December pound futures contracts. The December pound futures price is $1.278 per pound. Each contract is for delivery of 62,500 pounds. How many contracts should the auto dealer trade in? On July 1, an American auto dealer enters into a contract to purchase 20 British sports cars with payment to be made in pounds on November 1. Each car costs 35,000 pounds. The dealer is concerned that the pound will strengthen over the next few months. The dealer plans to trade in December pound futures contracts. The December pound futures price is $1.278 per pound. Each contract is for delivery of 62,500 pounds. How many contracts should the auto dealer trade in?
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To hedge against the risk of the pound strengthening the auto dealer wants to lock in the exch... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-1118742976
16th edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
Posted Date:
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