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Estimate the cost today of an options strategy

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A Japanese EXPORTER has a €1,200,000 receivable due in one year. Estimate the cost today of an options strategy that will eliminate the exchange rate risk. PLEASE EXPLAIN ANSWER

Listed Options Strike Puts Calls

Euro (€62,500) $1.25 = €1.00 $0.008 per € $0.0075 per €

Yen (¥12,500,000) $1.00 = ¥ 100 $0.006 per ¥100 $0.008 per ¥100

  1. $ 18,000
  2. $ 21,600
  3. $ 21,000
  4. $ 18,600

Reference no: EM132417249

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