Answer :
Answer:
a. $1,024,000
Explanation:
The exchange rate is quoted, thus the statement is at below:
"I will buy pound at $1.30, and sell pound forward 90 days at $1.28."
The steps taken including:
- Exchange $1,000,000 to have 769,230 pounds
- Deposit 769,230 pounds at rate 4% to have 800,000 in 90 days
= 769,230 * (1 + 4%) = 800,000 pounds
- Then exchange 800,000 pound to have $1,024,000
= 800,000 * 1.28 = $1,024,000
(*) 4% in 90 days is quite unreasonable for Great Britain, but this is a text question then just accept it
Option A is the correct answer, $1,024,000. The supporting computations are given below. Kindly follow through step by step. Since the exchange rate is quoted, the following assertion is made:
"I'll purchase a pound for $1.30 and sell it 90 days later at $1.28," says the trader.
The steps were taken including:
[tex]\frac{1,000,000}{1.30} = 769,231 \text{ pounds} \\\\769,231 \text{ x }(1+ 0.04) = 800,000 \text{ pounds} \\\\80,000 \text{ x }1.28 = 1,024,000[/tex]
- Exchange $1,000,000 for 769,230 pounds.
- Deposit 769,230 pounds at 4% interest for 800,000 pounds in 90 days.
- Finally, exchange 800,000 pounds for $1,024,000 pounds.
Learn more about the exchange rate here:
https://brainly.com/question/17230665