Examlex

Solved

A Firm Wants to Use an Option to Hedge 12

question 67

Multiple Choice

A firm wants to use an option to hedge 12.5 million in receivables from New Zealand firms. The premium is £0.01. The exercise price is £0.55. If the option is exercised, what is the total amount of pounds received (after accounting for the premium paid) ?


Definitions:

Small Company

A business with a small number of employees and a low volume of sales compared to larger companies in its industry.

Positive Statement

A statement that can be tested and validated; it describes what is and not what should be.

Federal Government

The national government of a federal republic, which possesses certain powers at the national level while other powers are shared with or reserved for the states.

Interest Rates

The percentage charged on a loan or paid on savings, effectively the price of capital.

Related Questions