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.

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter11: Managing Transaction Exposure

Section: Chapter Questions

Problem 1ST

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