Question
On December 1, 2024, Keenan Company, a U.S. firm, sold merchandise to Velez Company of Canada for 150,000 Canadian dollars (CAD). Collection of the receivable
On December 1, 2024, Keenan Company, a U.S. firm, sold merchandise to Velez Company of Canada for 150,000 Canadian dollars (CAD). Collection of the receivable is due on February 1, 2025. Keenan purchased a foreign currency put option with a strike price of $0.97 (U.S.) on December 1, 2024. This foreign currency option is designated as a cash flow hedge. Relevant exchange rates follow: Date Spot Rate Option Premium December 1, 2024 $ 0.97 $ 0.05 December 31, 2024 $ 0.95 $ 0.04 February 1, 2025 $ 0.94 $ 0.03 Compute the fair value of the foreign currency option at December 1, 2024. Multiple Choice
$6,000
$4,500
$3,000
$7,500
$1,500
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