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A firm has a payable of 20,000 due in 3 months. A 3-month call option is available with the strike price of $1.30 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 of $1.30 per pound. The option premium is $0.06. 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.
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