On December 1, 20x1 Pimlico Made Sales to a Customer

question 41

Multiple Choice

On December 1, 20x1 Pimlico made sales to a customer in India and recorded Accounts Receivable of 10,000,000 rupees. The customer has until March 1, 20x2 to pay. On December 1, 20x1, Pimlico paid $500 for a put option to sell rupees at a strike price of $2.30 per 100 rupees on March 1, 20x2, which was the spot rate on December 1, 20x1. On December 31, 20x1, the spot rate was $2.80 per 100 rupees and the option premium was $0.004 per 100 rupees.
-What is the fair value of the option on December 1, 20x1?

• A)$0
• B)$500
• C)$400
• D)$10,000

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Definitions:

Disaffirm

The act of denying, rejecting, or nullifying a legal contract or agreement.

Rare Violin

A unique and often antique violin valued highly for its historical significance, craftsmanship, and sound quality.

Second-hand Furniture

Furniture that has been previously owned and used before being sold again.

Consideration

In contract law, something of value exchanged between parties, which is a necessary element for the formation of a legally binding contract.