Question
A U.S. corporation has purchased currency put options to hedge a 70,000 pound () receivable. The premium is $0.02 and the exercise price of the
A U.S. corporation has purchased currency put options to hedge a 70,000 pound () receivable. The premium is $0.02 and the exercise price of the option is $0.50. If the spot rate at the time of maturity is $0.65, what is the total amount received by the corporation if it acts rationally?
A. $44,100
B. $36,400
C. $46,900
D. $35,000
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
Contemporary Financial Management
Authors: R. Charles Moyer, William J. Kretlow, James R. Mcguigan
8th Edition
0324065914, 9780324065916
