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A U.S. corporation has purchased currency call options to hedge a 70,000 pound payable. The premium is 2 cents per GBP and the exercise price
A U.S. corporation has purchased currency call options to hedge a 70,000 pound payable. The premium is 2 cents per GBP and the exercise price of the option is 1.6500 (USD per 1 GBP). If the spot rate at the time of maturity is 1.7100 USD per GBP, what is the net profit the company gets from the option hedge?
| $3,600. | ||
| $4,900 | ||
| $2,800 | ||
| $1,400 |
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