On June 18,Burger Corporation Entered into a Firm Commitment to Purchase

question 74

Multiple Choice

On June 18,Burger Corporation entered into a firm commitment to purchase specialized equipment from the Hyabuza Trading Company for ¥80,000,000 on August 20.The exchange rate on June 18 is ¥100 = $1.To reduce the exchange rate risk that could increase the cost of the equipment in U.S.dollars,Burger pays $12,000 for a call option contract.This contract gives Burger the option to purchase ¥80,000,000 at an exchange rate of ¥100 = $1 on August 20.On August 20,the exchange rate is ¥93 = $1.How much did Burger save by purchasing the call option (answers rounded to the nearest dollar) ?

• A) $12,000
• B) $48,215
• C) $60,215
• D) Burger would have been better off not to have purchased the call option.

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Definitions:

Meat Powder

Ground or finely divided meat used in various contexts, including as a food ingredient or in laboratory settings as a stimulus in the study of animal behavior.

Conditioned Response

A learned response to a previously neutral stimulus that has been repeatedly presented along with an unconditioned stimulus.

Tone

can refer to the quality or character of sound, or in linguistics, the use of pitch in language to distinguish lexical or grammatical meaning.

Salivation

The secretion of saliva in the mouth, which is stimulated by the presence or anticipation of food and aids in digestion.