REFERENCE: Ref.09_04 on December 1,2007,Keenan Company,a U.S.firm,sold Merchandise to Velez Company of Company

question 65

Multiple Choice

REFERENCE: Ref.09_04
On December 1,2007,Keenan Company,a U.S.firm,sold merchandise to Velez Company of Spain for 150,000 euro.Payment is due on February 1,2008.Keenan entered into a forward exchange contract on December 1,2007,to deliver 150,000 euro on February 1,2008 for $.97.Keenan chose to use a foreign currency option to hedge this foreign currency asset designated as a cash flow hedge.Relevant exchange rates follow:
-Compute the value of the foreign currency option at December 1,2007.

• A)$6,000.
• B)$4,500.
• C)$3,000.
• D)$7,500.
• E)$1,500.

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