asked 168k views
5 votes
A U.S. corporation has purchased currency call options to hedge a ₤70,000 payable. The premium is $.02 [.05] and the exercise price of the option is $.50 [$1.50]. If the spot rate at the time of maturity is $.65 [$1.65], what is the total amount paid by the corporation if it acts rationally?

asked
User Saunderl
by
8.0k points

1 Answer

4 votes

Answer:

$36,400.

Step-by-step explanation:

70,000 *.5 = 35,000

70,000 *.02 = 1400

35,000 + 1400 = 36,400

answered
User SQiShER
by
8.7k points
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