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ABC (British firm) must make a payment of C$900,000 to one of its Canadian customers in three months. ABC decides to use call options to
ABC (British firm) must make a payment of C$900,000 to one of its Canadian customers in three months. ABC decides to use call options to fully hedge its Canadian dollar payment. Three month call options on 100,000 Canadian dollars have an exercise price of .95 pounds and a premium of .03 pounds. Find ABC's profit/loss (in terms of pounds) if the exchange rate is .995 pounds per Canadian dollar at expiration.
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