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14) Trident the same U.S.-based company discussed in this chapter, has concluded a second larger sale of telecommunications equipment to Regency (U.K.). Total payment of
14) Trident the same U.S.-based company discussed in this chapter, has concluded a second larger sale of telecommunications equipment to Regency (U.K.). Total payment of 2,000,000 is due in 90 days. Trident is considering buying 2,000,000 put options with strike of $1.54/. Given the following exchange rates and interest rates, how much is the (net) dollar receipt if the spot rate is $1.5581/ at the end of 90 days?
Assumptions | Value | |
90-day A/R in pounds | 2,000,000.00 | |
Spot rate, US$ per pound ($/) | $1.5610 | |
90-day forward rate, US$ per pound ($/) | $1.5421 | |
3-month U.S. dollar investment rate | 4.000% | |
3-month U.S. dollar borrowing rate | 6.000% | |
3-month UK investment interest rate | 4.500% | |
3-month UK borrowing interest rate | 8.000% | |
Put options on the British pound: Strike rates, US$/pound ($/) | ||
Strike rate ($/) | $1.55 | |
Put option premium | 1.500% | |
Strike rate ($/) | $1.54 | |
Put option premium | 1.000% | |
Strike rate ($/) | $1.55 | |
Call option premium | 2.500% | |
Trident's WACC | 9.000% | |
Maria Gonzalez's expected spot rate in 90 days, US$ per pound ($/) | $1.5431 |
Select one:
a.
$3,116,122.45 |
b.
$3,000,200.00 |
c.
$3,084,200.00 |
d.
$3,048,077.55 |
e.
$3,080,000.00 |
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