Question
Radoski Corpportion (a U.S. based firm) negotiates a conditional currency put options with Citizens Bank to hedge its accounts receivable of 5 million Swiss Francs
Radoski Corpportion (a U.S. based firm) negotiates a conditional currency put options with Citizens Bank to hedge its accounts receivable of 5 million Swiss Francs due on October 31. Radoski Corpportion will only exercise its option on the due date. The terms of the conditional currency put options are as follows: K (exercise price) = $1.04 per Swiss Franc, Trigger = $1.06 per Swiss Franc, premium = $0.04 per Swiss Franc, expiration date = October 31. If the spot rate on the due date, i.e., October 31, is $1.02 per Swiss Franc, what is the amount of U.S. dollar Radoski Corporation expects to receive for its 5 million Swiss Francs?
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