Question 2

Your company here in Malaysia will need to purchase USD 100,000 in 90 days. A call option exists on USD with an exercise price of $0.24, a 90-day expiration date, and a premium of $.04. A put option exists on USD with an exercise price of $0.25, a 90-day expiration date, and a premium of $.04. You plan to purchase options to cover its future payables. It will exercise the option in 90 days (if at all). If the spot rate of the USD in 90 days is $0.245, determine the amount of dollars it will pay for the payables, including the amount paid for the option premium.