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Suppose a Japanese company, Matsushita, has to sell Can$ 50 m sometime during the next 6 months, and would like to lock in a minimum ¥ value. The price of a put option with a strike price of K = ¥ 230/$ is ¥ 4/$ What is the actual amount that they receive if the spot rate at the end of 3 months is ¥ 245/$?Since ST >K, the options are worthless and Matsushita can do better by selling at the market rate of ¥ 245/$, rather than the exercise price of ¥ 230/$. Thus, their total receipts will be O¥4/$ O¥ 234 / $ O¥241/$ O¥ 230 / $

Suppose a Japanese company, Matsushita, has to sell Can$ 50 m sometime during the next 6 months, and would like to lock in a minimum ¥ value. The price of a put option with a strike price of K = ¥ 230/$ is ¥ 4/$ What is the actual amount that they receive if the spot rate at the end of 3 months is ¥ 245/$?Since ST >K, the options are worthless and Matsushita can do better by selling at the market rate of ¥ 245/$, rather than the exercise price of ¥ 230/$. Thus, their total receipts will be O¥4/$ O¥ 234 / $ O¥241/$ O¥ 230 / $

International Financial Management
International Financial Management
14th Edition
ISBN:9780357130698
Author:Madura
Publisher:Madura
Chapter5: Currency Derivatives
Section: Chapter Questions
Problem 4ST
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Suppose a Japanese company, Matsushita, has to sell Can$ 50 m sometime during the next 6 months, and would like to lock in a minimum ¥ value. The price of a put option with a strike price of K = ¥ 230/$ is ¥ 4/$ What is the actual amount that they receive if the spot rate at the end of 3 months is ¥ 245/$?Since ST >K, the options are worthless and Matsushita can do better by selling at the market rate of ¥ 245/$, rather than the exercise price of ¥ 230/$. Thus, their total receipts will be O¥4/$ O¥ 234 / $ O¥241/$ O¥ 230 / $
Transcribed Image Text:Suppose a Japanese company, Matsushita, has to sell Can$ 50 m sometime during the next 6 months, and would like to lock in a minimum ¥ value. The price of a put option with a strike price of K = ¥ 230/$ is ¥ 4/$ What is the actual amount that they receive if the spot rate at the end of 3 months is ¥ 245/$?Since ST >K, the options are worthless and Matsushita can do better by selling at the market rate of ¥ 245/$, rather than the exercise price of ¥ 230/$. Thus, their total receipts will be O¥4/$ O¥ 234 / $ O¥241/$ O¥ 230 / $
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