A Canadian exporter will receive $1.5 million USD in September,and decides to buy a put option on the USD for September delivery.Suppose a put option on the USD with a September expiration and a strike price of 1.275 USD/CADtrades for 0.0115CAD per put on 1 USD.If,by the September expiration date,the USD has appreciated to 1.250 USD/CAD,how much did the firm lose (in CAD) from hedging with the option,compared to remaining unhedged?
A) $0
B) $54,750
C) $20,250
D) $17,250
E) $37,500
Correct Answer:
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