A US Corporation Has Purchased Currency Call Options to Hedge a a 70,000

question 115

Multiple Choice

A U.S. corporation has purchased currency call options to hedge a 70,000 pound (£) payable. The premium is $.02 and the exercise price of the option is $.50. If the spot rate at the time of maturity is $.65, what is the total amount paid by the corporation if it acts rationally?

• A) $33,600
• B) $46,900
• C) $44,100
• D) $36,400

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Definitions:

Anorexia Nervosa

A psychiatric disorder characterized by an intense fear of gaining weight and a distorted body image, leading to self-starvation and excessive weight loss.

Amenorrhea

The absence of menstruation in women of reproductive age, which can be a symptom of health issues or physical exertion and stress.

DSM-5

The 5th edition of the Diagnostic and Statistical Manual of Mental Disorders, a standardized classification and diagnostic tool used by mental health professionals.

Binge/Purge Type

A subtype of certain eating disorders, where individuals engage in recurrent episodes of binge eating followed by purging to prevent weight gain.