Spears Co. will receive SF1,000,000 in 30 days. Use the following information to determine the total dollar amount received (after accounting for the option premium) if the firm purchases and exercises a put option:
$\begin{array}{lll}
\text { Exercise price } & = & \$ .61 \
\text { Premium } & = & \$ .02 \
\text { Spot rate } & = & \$ .60 \
\text { Expected spot rate in } 30 \text { days } & = & \$ .56 \
30 \text {-day forward rate } & = & \$ .62 \%
\end{array}$
A) $630,000.
B) $610,000.
C) $600,000.
D) $590,000.
E) $580,000.

Question

Quizplus · Accepted Answer

SOLUTION:($.61 - $.02) × SF1,000,000 = $590,000

Spears Co Will Receive SF1,000,000 in 30 Days A) $630,000