Question
Your firm has just completed a sale to a large customer in Paris. The invoice is for EUR 5,000,000 and the credit terms are 90
Your firm has just completed a sale to a large customer in Paris. The invoice is for EUR 5,000,000 and the credit terms are 90 days. The spot exchange rate for the euro is $1.1467/EUR. The euros will be sold for USD when received. Which of the following is the best choice to hedge the firms exchange rate risk?
A. | Purchase a 3-month put option with a strike price of $1.1700 and a premium of $0.0364/EUR. | |
B. | Purchase a 3-month call option with a strike price of $1.1600 and a premium of $0.0217/EUR. | |
C. | Purchase a 1-month call option with a strike price of $1.1350 and a premium of $0.00169/EUR. | |
D. | Purchase a 3-month put option with a strike price of $1.1400 and a premium of $0.0105/EUR. |
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