A U.S. corporation has purchased currency call options to hedge a 70,000 pound (£) payable. The premium is $0.02 and the exercise price of the option is $0.50. If the spot rate at the time of maturity is $0.65, what is the total amount paid by the corporation if it acts rationally?
A)$33,600
B)$46,900
C)$44,100
D)$36,400

Question

A U.S. corporation has purchased currency call options to hedge a 70,000 pound (£) payable. The premium is $0.02 and the exercise price of the option is $0.50. If the spot rate at the time of maturity is $0.65, what is the total amount paid by the corporation if it acts rationally?​
A)$33,600
B)$46,900
C)$44,100
D)$36,400

Quizplus · Accepted Answer

The Answer of A U.S. corporation has purchased currency call options to hedge a 70,000 pound (£) payable. The premium is $0.02 and the exercise price of the option is $0.50. If the spot rate at the time of maturity is $0.65, what is the total amount paid by the corporation if it acts rationally?​
A)$33,600
B)$46,900
C)$44,100
D)$36,400

A US Corporation Has Purchased Currency Call Options to Hedge a a 70,000