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

question 55

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 31, 20x1?

• A)$0
• B)$500
• C)$400
• D)$10,000

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Definitions:

Administrative Expenses

Costs associated with the general operation of a business or organization, excluding production or direct costs.

Nonprofit's Opportunity

The chance for nonprofit organizations to pursue their mission, often through funding, partnerships, or innovations that align with their goals.

Government Support

Financial or regulatory assistance provided by the government to businesses, organizations, or individuals, often aiming to promote certain economic activities or social goals.

For-profit Corporation

A type of business entity that is primarily focused on earning profits for its shareholders, contrasting with nonprofit organizations that aim to serve a social or public benefit.