Question
A firm has a payable of 20,000 due in 3 months. A 3 month call option is available with the strike price $1.45 per pound.
A firm has a payable of 20,000 due in 3 months. A 3 month call option is available with the strike price $1.45 per pound. The option premium is $0.04. What is the maximum cost if hedging is done with the call option? The interest rate in the US is 4 % per annum or 1% for a 3 month period. Round the answer to the nearest dollar and report it without the $ symbol.
----------------------------------------------------------------------------------
A firm has a payable of 20,000 due in 3 months. A 3 month call option is available with the strike price $1.45 per pound. The option premium is $0.04. What is the total cost (including the cost of the option) if hedging is done with the call option and the spot rate at the end of three months was $1.35 per pound? The interest rate in the US is 4 % per annum or 1% for a 3 month period.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
Concise 6th Edition
324664559, 978-0324664553
