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:

Operant Behavior

A behavioral concept that involves an organism's actions being influenced by the consequences that follow, as described in operant conditioning.

Reinforcement

In behaviorist psychology, it refers to any stimulus that strengthens or increases the probability of a specific response or behavior by delivering a reward or removing an unpleasant stimulus.

Variable-Ratio Schedule

In operant conditioning, a reinforcement schedule where responses are rewarded after an unpredictable number of responses, leading to high and steady response rates.

Piece-Rate Pay

A compensation system where workers are paid a fixed rate for each unit of production completed, motivating higher productivity.