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What is the effective dollar price that the auto dealer pays

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13- On July 1, an American auto dealer enters into a contract to purchase 56 British sports cars with payment to be made in pounds on November 1. Each car costs 41,000 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 $1.300 per pound. Each contract is for delivery of 62,500 pounds.

The spot rate on November 1 is $1.2500 per pound and the December pound futures price is $1.2700. What is the effective dollar price that the auto dealer pays per sports car after taking into account the gain or loss in the futures market? (Assume that the correct number of futures contracts are bought. The number of contracts to buy is rounded to the nearest integer. Round down decimals less than 0.5 and round up for 0.5 or more)

Select one:

a. $49,238
b. $50,176
c. $52,245
d. $52,489
e. $51,208

Reference no: EM132826004

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