1. In December 2005, the spot exchange rate for the British Pound was USD 1.7188 / GBP and the one-year forward rate was USD 1.8675 / GBP. Suppose that at the same time Malacantra Restaurants, Inc. (MRI) entered into a contract to purchase goods with a price of GBP 375,000 to be delivered in one year. Simultaneously MRI entered into a one-year forward contract to purchase GBP 375,000. At the time the contract payment was due, the spot exchange rate was USD 1.9975 / GBP. What is the amount of the payment in U.S. dollars that MRI paid?
a) USD 700,312.50
b) USD 644,550.00
c) USD 749,062.50
d) USD 200,803.20
2. In June 2016, the spot exchange rate for the British Pound was USD 1.4255 / GBP. Suppose that at the same time Malacantra Restaurants, Inc. (MRI) entered into a contract to purchase goods with a price of GBP 400,000 to be delivered in one year. There is a one-year option call contract available to MRI which will allow the company to purchase GBP 10,000 for USD 1.50 / GBP. If MRI purchases 40 option contracts, and the spot rate at the time the contract is due is USD 1.8725 / GBP, how much will MRI pay for the goods?
a) USD 570,200.00
b) USD 266,666.70
c) USD 600,000.00
d) USD 749,000.00
3. In June 2016, the spot exchange rate for the British Pound was USD 1.4255 / GBP. Suppose that at the same time Malacantra Restaurants, Inc. (MRI) entered into a contract to purchase goods with a price of GBP 400,000 to be delivered in one year. There is a one-year option call contract available to MRI which will allow the company to purchase GBP 10,000 for USD 1.50 / GBP. If MRI purchases 40 option contracts, and the spot rate at the time the contract is due is USD 1.3465 / GBP, how much will MRI pay for the goods?
a) USD 570,200.00
b) USD 538,600.00
c) USD 600,000.00
d) USD 749,000.00