A US Firm Has Sold an Italian Firm €1,000,000 Worth of of Product

question 12

Multiple Choice

A U.S. firm has sold an Italian firm €1,000,000 worth of product. In one year the U.S. firm gets paid. To hedge, the U.S. firm bought put options on the euro with a strike price of $1.65. They paid an option premium $0.01 per euro. If at maturity, the exchange rate is $1.60,

• A)the firm will realize $1,145,000 on the sale net of the cost of hedging.
• B)the firm will realize $1,150,000 on the sale net of the cost of hedging.
• C)the firm will realize $1,140,000 on the sale net of the cost of hedging.
• D)none of the above

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Definitions:

Persuasive Messages

Communications designed to influence or convince the audience of a particular view, idea, or action.

Price

The cost required to purchase goods or services, typically determined by factors like market demand and production costs.

Sales Letter

A written message designed to promote products or services to potential buyers.

Audience Objections

Concerns or disagreements raised by the audience, particularly during presentations or sales pitches.