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Assume that Zhang Corporation will need to sell 200,000 British pounds in 90 days. A call option exists on British pounds with an exercise
Assume that Zhang Corporation will need to sell 200,000 British pounds in 90 days. A call option exists on British pounds with an exercise price of $1.68, a 90-day expiration date, and a premium of $.04. A put option exists on British pounds, with an exercise price of $1.69, a 90-day expiration date, and a premium of $0.03. Zhang Corporation plans to purchase options to cover its future payables. It will exercise the option in 90 days (if at all). It expects the spot rate of the pound to be $1.76 in 90 days. Determine the amount of dollars it will receive for the receivables, including the amount paid for the option premium (ignore time value of money). A) $331,000-$333,000 B) $335,000-$337,000 C) $338,000-$340,000 D) $345,000-$347,000 E) $359,000-$361,000
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