Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jul 24, 2024

A small American company wishes to hedge its anticipated income from sales in Australian dollars. It buys 2 option put contracts (each worth 10,000 Australian

A small American company wishes to hedge its anticipated income from sales in Australian dollars. It buys 2 option put contracts (each worth 10,000 Australian dollars) to sell the Australian dollar at a rate of $0.75 per AUD in 2 months. The premium to purchase the put is 2 cents ($0.02).

How much will the company receive in U.S. dollars if it exercises the options contracts?

THE ANSWER IS 15,000 BUT PLEASE SOMEONE EXPLAIN HOW

Step by Step Solution

There are 3 Steps involved in it

Step: 1

Get Instant Access with AI-Powered 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

Recommended Textbook for

Advanced Accounting

Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik

10th edition

0-07-794127-6, 978-0-07-79412, 978-0077431808

Students also viewed these Finance questions

Question

Determine the rejection region for a test of the independence of two dichotomous variables that is based on the chi-squared distribution when (a) ???? = 0.01 (b) ???? = 0.05

Answered: 1 week ago

Question

★★★★★

Refer to the information in question. In question, Garcia and Buffet, a local CPA firm, has budgeted $100,000 in fixed expenses per month for the tax department. It has also budgeted variable costs...

Answered: 1 week ago

Question

★★★★★

When Crossett Corporation was organized in January Year 1, it immediately issued 5,900 shares of $53 par, 8 percent, cumulative preferred stock and 8,500 shares of $7 par common stock. Its earnings...

Answered: 1 week ago

Question

★★★★★

Please show your solution based on philippines the PROBLEM 2 (Adapted) Star Company provided the following fringe benefits to its employees during the 2018 taxable year: Fringe benefits provided to...

Answered: 1 week ago

Question

★★★★★

7. The case discusses two events during the year that impacted the use of labor (and therefore the unfavorable flexible budget variance for direct labor): the 50,000 unit sales to the catalog company...

Answered: 1 week ago

Question

★★★★★

An integral component of the ability to make strategic decisions is to have an educated understanding of the environmental aspects that can impact an organization. The internal and external...

Answered: 1 week ago

Question

★★★★★

The day had gone surprisingly well considering all the activity at Central High School. Central was hosting the league track championships on the same day it was playing a baseball doubleheader...

Answered: 1 week ago

Question

★★★★★

1. Your father knows that last week you have learned jointly distributed random variables from Aybek Hoca. He has asked you to calculate certain distributions and expectations. Please let X denote...

Answered: 1 week ago

Question

★★★★★

There Were Ethical Dilemmas All Day Long," in your opinion, should a researcher conduct an ethnographic research study even if he or she acknowledges that he cannot be objective or unbiased during...

Answered: 1 week ago

Previous Question Next Question