ABC Corporation, Located in Canada, Has an Accounts Receivable of SF

question 23

Multiple Choice

ABC Corporation, located in Canada, has an accounts receivable of SF 1 million to be received in one year. The current spot rate is $0.80/SF and the six-month forward rate is $0.82/SF. The one year interest rates are 4.5 percent and 2 percent in Canada and Switzerland respectively. A one-year call option on Swiss franc at the strike price of $0.81 per Swiss franc for a premium of 0.2 cent per Swiss franc is available.
-Assume that the forward rate is the best predictor of the future spot rate.The expected future dollar amount of this receivable using the option hedge is:

• A) $799,100
• B) $800,000
• C) $810,100
• D) $820,000

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Definitions:

Public Self

An aspect of an individual's identity that is presented to and perceived by others in social contexts.

Private Self

The aspect of an individual's self-concept that is kept internal and private, not usually revealed or expressed openly to others.

Generalized Other

A concept referring to the common behavioral expectations of a society, allowing individuals to anticipate how others will react to their actions.

George Herbert Mead

An early 20th-century sociologist and philosopher known for his work on developing the theory of symbolic interactionism.