A US Corporation Has Purchased Currency Put Options to Hedge a a 100,000

question 140

Multiple Choice

A U.S. corporation has purchased currency put options to hedge a 100,000 Canadian dollar (C$) receivable. The premium is $.01 and the exercise price of the option is $.75. If the spot rate at the time of maturity is $.85, what is the net amount received by the corporation if it acts rationally?

• A) $74,000
• B) $84,000
• C) $75,000
• D) $85,000

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Definitions:

Ethics

A branch of philosophy that involves systematizing, defending, and recommending concepts of right and wrong behavior, focusing on the morality of human actions.

Behavior

The actions or reactions of an individual or group in response to external or internal stimuli.

Penalty

A punishment imposed for breaking a law, rule, or contract.

Shareholders Rights

Legal entitlements that allow shareholders to have a say in the corporation's management, actions, and decisions, typically through voting rights and the ability to sue for wrongful acts.