3. Quasik Corporation will be receiving 300,000 Canadian dollars (C$) in 90 days

Question

3. Quasik Corporation will be receiving 300,000 Canadian dollars (C$) in 90 days. Currently, a 90-day call option with an exercise price of $.75 and a premium of $.01 is available. Also, a 90-day put option with an exercise price of S.73 and a premium of $.01 is available. Quasik plans to purchase options to hedge its receivable position. Assuming that the spot rate in 90 days is S.71, what is the net amount received from the currency option hedge? A) $219,000. B) $222,000. C) $216,000. D) $213,000. 6

Explanation / Answer

Since the spot price is less than the strike price of $0.75, the call option won't be exercised. Hence, we exercise the put option

Net amount received will be 30000*(0.73-0.01)= 216000

Answer is C

Related Questions

Navigate

• Browse (All)
• Browse 3
• Subjects

---