A Put Option Exists on Dollars with an Exercise Price

question 44

Multiple Choice

A put option exists on dollars with an exercise price of £0.55, a 90-day expiration date, and a premium of £0.02 per unit. You plan to purchase options to cover your future receivables of $700,000 pounds in 90 days. You will exercise the option in 90 days (if at all) . You expect the spot rate of the dollar to be £0.54 in 90 days. Determine the amount of dollars to be received, after deducting payment for the option premium.

• A) £406,000
• B) £339,000
• C) £364,000
• D) £371,000
• E) £385,000

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