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Required answers for all the questions A US importer will have a net cash outflow of 500,000 in payment for goods bought, the payment date

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Required answers for all the questions

A US importer will have a net cash outflow of 500,000 in payment for goods bought, the payment date is not known with certainty, but should occur in late November. On September 16, the importer locks into a ceiling purchase price for pounds by buying sixteen PHLX calls on the pound (each with a face value of 31,250), with a strike price of $3/ and an expiration date in December. The option premium on that date is $0.0228/. There is a brokerage commission of $50 per option contract. Required b) Calculate the total cost of the contracts. c) What ceiling purchase price for pounds has the importer locked into? d) If on the November payment date the spot rate is $1.46/, would the importer exercise the options? What is the importers dollar cost for the 500,000 payment

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