ABC Corporation, located in Canada, has an accounts receivable of SF 1 million to be received in one year. The current spot rate is $0.80/SF and the six-month forward rate is $0.82/SF. The one year interest rates are 4.5 percent and 2 percent in Canada and Switzerland respectively. A one-year call option on Swiss franc at the strike price of $0.81 per Swiss franc for a premium of 0.2 cent per Swiss franc is available.
-The future dollar amount of this receivable using the forward hedge is:
A) $800,000
B) $820,000
C) $836,400
D) $856,900

Question

Quizplus · Accepted Answer

Using forward hedge, the future dollar amount of the receivable will be

ABC Corporation, Located in Canada, Has an Accounts Receivable of SF