Option Hedge 1 On June 1, the PM Corp. (a U.S.-based company) sold goods to a Swiss customer for 100,000 francs, who will pay on October 1. On June 1, PM purchased an option (strike price = $1.00) to sell 100,000 francs on October 1. The option is designated a fair value hedge. The option's time value is excluded in assessing hedge effectiveness, and the change in time value is recognized in net income. Relevant $ exchange rates per franc and option premia follow. At What is the fair value of the option contract on June 1?

\begin{tabular}{llll} Date & Spot Rate & Put Option & Premium for Oct. 1(strike price \$1.00) \\ June 1 & $1.000 & $0.040 & \\ June 30 & 0.985 & 0.032 & \\ October 1 & 0.972 & N/A & \end{tabular}