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You are a U.S. exporter of soybeans and have just received an order from the U.K. You will deliver soybeans today to the buyer in
You are a U.S. exporter of soybeans and have just received an order from the U.K. You will deliver soybeans today to the buyer in the U.K. and receive a payment of 100,000 in one year. You are concerned about the dollar proceeds you will receive from this foreign sale in one year and decide to hedge your exchange rate risk using options. The current spot exchange rate is $1.45/, and the forward exchange rate is $1.40/. The U.S. interest rate is 2.00%, and the U.K. interest rate is 4.00%. A call option with a strike price of $1.40/ is available with a premium of $0.10/. A put option with a strike price of $1.40/ is available with a premium of $0.08/. What will be your total dollar proceeds from this sale in one year with the options hedge if the spot rate in one year turns out to be $1.50/ ? Consider whether you will exercise your options if the future spot rate turns out to be $1.50/. Enter the numeric portion of your
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