Calculate the effective ceiling purchase price in uk pound

Assignment Help Financial Accounting
Reference no: EM132892446

As the Finance Officer of a fortune 500 company, your company in January 2021 imported goods from the UK at a value of £500,000. The payment date for the goods is deferred to November 2021. To manage your exchange risk, you have decided to buy call options on the Philadelphia exchange (each PHLX calls has a face value of £31,250). The prevailing call strike price is $1.25/£ with an expiration date in December. The option premium on that date is $0.0139/£. There is a brokerage commission of $30 per option contract.

Problem 1: How much will it cost to secure this contract?

Problem 2: Calculate the effective ceiling purchase price in the UK pound sterling and the US dollar?

Problem 3: If in November the spot rate is $1.30/£, would you exercise the options? What will be the dollar cost for the £500,000 payment?

Reference no: EM132892446

Questions Cloud

Find information on the five styles of bi : Go to micro strategy. Find information on the five styles of BI. Prepare a summary table for each style.
What amount should em charge against income : On January 1, 2018, What amount should EM charge against income during 2020, assuming amortization is recorded at the end of the year?
How much is the total dividend payable to shareholders : If preference is non-cumulative and participating up to 10%, how much is the total dividend payable to preference shareholders
What elements of the marketplace : What elements of the marketplace in which MegaTech operates led the firm to believe that project management would improve its operations?
Calculate the effective ceiling purchase price in uk pound : If in November the spot rate is $1.30/£, would you exercise the options? What will be the dollar cost for the £500,000 payment?
What would be the price of three-month european put option : Consider a non-dividend-paying stock with current share.What would be the price of the three-month European put option on the stock with a strike price of 160p.
Prepare the journal entry to record the replacement : During 2020 the total sales for SIAST Corporation was $650,000 or 13,000 calculators sold at $50 per unit. Prepare the journal entry to record the replacement
Personal identity verification : The Personal Identity Verification (PIV) card is used in non-military government agencies for authentication and identification to gain access to systems,
Prepare the journal entries on december : The power bill for December in the amount of $125 was received but is unpaid and unrecorded. Prepare the journal entries on December

Reviews

Write a Review

Financial Accounting Questions & Answers

  Multiple choices on variance analysisthe following company

multiple choices on variance analysis.the following company information is availabledirect materials used for

  What amount of cash was paid to the preferred shareholders

On November 1, Kramer declares the dividend and pays it on December 1. What amount of cash was paid to the preferred shareholders?

  What financial statements instead of the market value

Start of the 2020 planting season. If the cost of the closing inventory were to be used for the 2019 financial statements instead of the market value

  Determine minimum price that shorewood shoes should charge

Determine the minimum price that Shorewood Shoes should charge for this order. What other considerations are relevant in this decision?

  Compute total production for the entire company each week

You are automating the weekly production reports so that you can easily compute total production for the entire company each week.

  Uses the double-declining-balance method of depreciation

The Howard Company purchased equipment on September 1, 2003, for $200,000. The residual value is $20,000 and the estimated life is 5 years or 60,000 hours. Compute depreciation expense for the year ending December 31, 2004, if the Howard Company uses..

  Manufactures a single product

Frank Corporation manufactures a single product that has a selling price of $30.00 per unit. Fixed expenses total $51,000 per year, and the company must sell 8,500 units to break even. If the company has a target profit of $16,500, sales in units mus..

  Which term is used for a set of budgets

Which term is used for a set of budgets? Which budgeted financial statements are included in the set of budgets.List and explain the budgets in the set for a manufacturer or a merchandiser. Which budgeted financial statements are included in the sets..

  Compute the total asset turnover rate

Prepare a classified balance sheet with a proper heading on a spreadsheet. For assets, use the classifications of current assets, plant and equipment, intangibles, and other assets. For liabilities, use the classifications of current liabilities a..

  Compute the book value of the equipment at the end

Compute the book value of the equipment at the end of each of the four years. (If an answer is zero, please enter 0. Do not leave any fields blank.)

  Calculate degree of operating leverage

Calculate degree of operating leverage, degree of financial leverage and degree of combined or total leverage, change in sales is 5%

  Difference between

difference between authorized-issued-and outstanding shares

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd