The following information is to be used in answering questions 36?38.
U.S. borrowing rate for 1 year = 9.5%
U.S. deposit rate for 1 year = 8.7%
French borrowing rate for 1 year = 11.3%
French deposit rate for 1 year = 10.2%
French franc spot quote = $0.1763?78
French franc 1?year forward quote = $0.1729?47
-value can Alcoa lock in for its FF 3 million receivable if it executes a forward contract today?
A) $518,700
B) $524,100
C) $528,900
D) $532,410

Question

Quizplus · Accepted Answer

The correct answer is A because the forward rate is $0.172947, so the value of the receivable is FF 3,000,000 x $0.172947 = $518,700.

The Following Information Is to Be Used in Answering Questions