A U.S. corporation has purchased currency put options to hedge a 100,000 Canadian dollar (CAD) receivable. The premium is $0.01 per CAD and the exercise price of the option is $0.75 per CAD. If the spot rate at the time of maturity is $0.85 per CAD, what is the net amount of US dollar received by the corporation if it acts rationally, A) $74,000. B) $84,000. C) $75,000. D) $85,000.
A U.S. corporation has purchased currency put options to hedge a 100,000 Canadian dollar (CAD) receivable. The premium is $0.01 per CAD and the exercise price of the option is $0.75 per CAD. If the spot rate at the time of maturity is $0.85 per CAD, what is the net amount of US dollar received by the corporation if it acts rationally, A) $74,000. B) $84,000. C) $75,000. D) $85,000.
Chapter11: Managing Transaction Exposure
Section: Chapter Questions
Problem 1ST
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![A U.S. corporation has purchased currency put options to hedge a 100,000 Canadian dollar (CAD)
receivable. The premium is $0.01 per CAD and the exercise price of the option is $0.75 per CAD. If the
spot rate at the time of maturity is $0.85 per CAD, what is the net amount of US dollar received by the
corporation if it acts rationally,
A) $74,000. B) $84,000. C) $75,000. D) $85,000.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6bb88c59-5bc4-4071-8e12-df8b263a8fcb%2F8ec29e32-9ae2-47bc-be50-f139eb95e134%2F8awkcd_processed.png&w=3840&q=75)
Transcribed Image Text:A U.S. corporation has purchased currency put options to hedge a 100,000 Canadian dollar (CAD)
receivable. The premium is $0.01 per CAD and the exercise price of the option is $0.75 per CAD. If the
spot rate at the time of maturity is $0.85 per CAD, what is the net amount of US dollar received by the
corporation if it acts rationally,
A) $74,000. B) $84,000. C) $75,000. D) $85,000.
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