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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