A Firm Wants to Use an Option to Hedge 12

question 138

Multiple Choice

A firm wants to use an option to hedge 12.5 million in receivables from New Zealand firms. The premium is $.03. The exercise price is $.55. If the option is exercised, what is the total amount of dollars received (after accounting for the premium paid) ?

• A) $6,875,000.
• B) $7,250,000.
• C) $7,000,000.
• D) $6,500,000.
• E) none of the above

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Definitions:

Temperament

The inherent part of an individual's personality, including aspects like mood, disposition, and adaptability.

Thomas And Chess

Two psychologists known for their research in temperament, identifying three basic types of temperament in children: easy, difficult, and slow-to-warm-up.

Self-Concept

An individual's perception of themselves, shaped by personal experiences, attributes, and social interactions.

Attachment Phases

Stages through which a child develops close emotional bonds with caregivers, including pre-attachment, attachment in-the-making, clear-cut attachment, and formation of reciprocal relationships.