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The current spot rate is US$1.2025/E. August call options and put optens. Bn British pounds with a strike price of $1.2000 are available on PHLX
The current spot rate is US\$1.2025/E. August call options and put optens. Bn British pounds with a strike price of $1.2000 are available on PHLX with a premium of US $0.02 per podnd. The contract size is 10,000. Required (a) What options position should Cressida take in order to hedge its currency exposure in the options market? Explain. [2marks] (b) Using your answer to part (a), calculate the total hedged value of the receivable if by August: (i) The British pound has strengthened against the dollar to $1.2250/f. [2marks] (ii) The British pound has weakened against the dollar to $1.1875 ? [2 marks]
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