Question
Carson Printing is a U.S. multinational that just purchased 600,000 of goods on account, due in 30 days from a British supplier. The spot exchange
Carson Printing is a U.S. multinational that just purchased 600,000 of goods on account, due in 30 days from a British supplier. The spot exchange rate is $1.775/. Carson wants to hedge the account payable with an OTC call option with a strike price of $1.800/. The option premium is 0.50 percent, and the 30-day periodic rate in the U.S. is 0.40 percent. If the spot exchange rate in 30 days is $1.825/, what is the total cost of the account payable (including the cost of the option)?
HINT: Convert cost into USD. Find FV of Option Cost and add it to the cost of conversion.
A. $1085346 |
B. $1065000 |
C. $1045300 |
D. $1073000 |
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