UK pound spot rate Direct $1.2185 Indirect $0.8207 1-month forward Direct $1.2202 Indirect $0.8196 On January 9, 2023, you exchange 300,000 U.S. dollars for British pounds in the spot market and buy a one-month forward contract to convert pounds into U.S. dollars. What will your dollar amount be after one month? How much will you receive in U.S. dollars at the end of one month? Amount Received: $

To determine how much you'll receive in U.S. dollars after one month, follow these steps:

1. **Calculate the amount of pounds received from the spot exchange:**
   \[
   \text{Pounds received} = \frac{\text{USD amount}}{\text{Direct spot rate}} = \frac{300,000}{1.2185} \approx 246,800.90 \text{ GBP}
   \]

2. **Convert the pounds back to U.S. dollars using the forward rate:**
   \[
   \text{USD received in one month} = \text{Pounds received} \times \text{Indirect forward rate} = 246,800.90 \times 0.8196 \approx 202,225.09 \text{ USD}
   \]

Thus, the amount you will receive in U.S. dollars at the end of one month is approximately **$202,225.09**.

Would you like more details on the calculations or have any other questions? Here are some related questions to consider:

1. How do spot and forward rates differ in foreign exchange?
2. What factors influence changes in spot and forward rates?
3. How can currency exchange risks be managed?
4. What is the significance of indirect rates in foreign exchange transactions?
5. What would happen if you used a different forward contract length? 

**Tip:** Always monitor exchange rates, as they can fluctuate significantly over short periods, impacting your potential gains or losses in currency trading.

On January 9, 2023, you exchange 300,000 U.S. dollars for British pounds in the spot market and buy a one-month forward contract to convert pounds into U.S. dollars. What will your dollar amount be after one month?

Explore the calculations involved in converting 300,000 U.S. dollars to British pounds using spot and forward rates. The final amount received in U.S. dollars after one month is approximately $202,225.09. Suitable for high school students learning about currency exchange.

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