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Ceres Specialties is a Canadian company that has recently purchased 210 -day currency put options to hedge a 135,000 Australian dollar (AUD) receivable due to
Ceres Specialties is a Canadian company that has recently purchased 210 -day currency put options to hedge a 135,000 Australian dollar (AUD) receivable due to be paid by the their customer in 210 days. Ceres Specialties paid a premium of CADO.0424 to purchase the options with an exercise price of CADO.7818. At the time the options were purchased, the 210 -day money market interest rates were 5.30% p.a. and 2.33% p.a. for the Australian dollar and Canadian dollar respectively. Assume that the spot rate at the time of the options expiry is CAD0.8208/AUD. In addition, assume that Ceres Specialties borrowed in their domestic currency in order to fund the option premiums. Factoring in the time value of money, what is the net amount received by the company if it acts rationally? a. CAD105,006 b. CAD116,610 c. CAD104,951 d. CAD104,781 e. CAD104,907 f. CAD116,665 g. CAD116,835 h. CAD116,709 i. CAD105,084 j. CAD99,819 k. CAD105,543 1. CAD116,532 m. CAD110,808
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