A Canadian Exporter Will Receive $1 Million USD in September,and

question 17

Multiple Choice

A Canadian exporter will receive $1 million USD in September,and decides to buy a put option on the USD for September delivery.Suppose a put option on the USD with a September expiration and a strike price of 1.225 USD/CADtrades for 0.0225 CAD per put on 1 USD.If,by the September expiration date,the USD has depreciated to 1.275 USD/CAD,how much did the firm gain (in CAD) from hedging with the option,compared to remaining unhedged?

• A)$11,833
• B)$50,000
• C)$9,513
• D)$32,013
• E)$22,500

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Definitions:

Greatest Good

A concept often associated with utilitarianism, referring to the action that achieves the highest level of happiness or benefit for the greatest number of people.

Greatest Number

A concept often related to utilitarian philosophy, focusing on actions that benefit the majority or largest portion of a community.

Self-Assessment

The process of evaluating one's own strengths, weaknesses, and performance.

Maturity Stage

The phase in a product's lifecycle when growth slows, and the product reaches widespread acceptance and market saturation.