A Japanese EXPORTER Has a €1,000,000 Receivable Due in One

question 4

Multiple Choice

A Japanese EXPORTER has a €1,000,000 receivable due in one year. Estimate the cost today of an options strategy that will eliminate exchange rate risk. $$\begin{array} { l l l l } \hline \text { Listed Options } & & & \\& \text { Strike } & \text { Puts } & \text { Calls } \\\hline \begin{array} { l } \text { Euro } \\€ 62,500\end{array} & \$ 1.25 = € 1.00 & \$ 0.0075 \text { per } € & \$ 0.01 \text { per } € \\\hline \text { Yen } & & & \\¥ 12,500,000 & \$ 1.00 = \pm 100 & \$ 0.0075 \text { per } ¥ 100 & \$ 0.01 \text { per } ¥ 100 \\\hline\end{array}$$

• A)$20,000
• B)$5,000
• C)$12,500
• D)None of the above

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