A US Corporation Has Purchased Currency Put Options to Hedge a a 100,000

question 39

Multiple Choice

A U.S. corporation has purchased currency put options to hedge a 100,000 Canadian dollar (C$) receivable. The premium is $.01 and the exercise price of the option is $.75. If the spot rate at the time of maturity is $.85, what is the net amount received by the corporation if it acts rationally?

• A) $74,000.
• B) $84,000.
• C) $75,000.
• D) $85,000.

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Definitions:

Physical Appearance

Refers to the outward look or aspects of a person, including body shape, facial features, hair, and other physical traits.

Visual Stimulus

Any object or event in the environment that can be seen and thus influences the behavior or perception of the observer.

Blindsight

A phenomenon in which individuals with certain types of brain damage can respond to visual stimuli without consciously perceiving them.

The Cocktail Party Effect

The ability to focus one's auditory attention on a particular stimulus while filtering out a range of other stimuli, as when a person can focus on a single conversation in a noisy environment.