On May 1, 20x1, Ustar Purchased a Put Option to Sell

question 44

Multiple Choice

On May 1, 20x1, Ustar purchased a put option to sell £50,000 on April 30, 20x2 at a strike price equal to $2, which was the spot rate on May 1, 20x1.Ustar paid a premium of $0.01 per pound.How should the option be recorded on May 1, 20x1?

• A)Debit Foreign Currency Option for $100,500.
• B)Credit Foreign Currency Option for $100,500.
• C)Debit Foreign Currency Option for $500.
• D)Debit Hedge Expense for $500.