Fab plans to purchase options to hedge its payable position

Assignment Help Accounting Basics

Reference no: EM13391103

FAB Corporation will need 200,000 Canadian dollars (C$) in 90 days to cover a payable position. Currently, a 90-day call option with an exercise price of $.75 and a premium of $.01 is available. Also, a 90-day put option with an exercise price of $.73 and a premium of $.01 is available. FAB plans to purchase options to hedge its payable position. Assuming that the spot rate in 90 days is $.71, what is the net amount paid, assuming FAB wishes to minimize its cost?

a. $144,000.

b. $148,000.

c. $152,000.

d. $150,000.

Reference no: EM13391103

Questions Cloud

Which of the following is a reason to consider : which of the following is a reason to consider international business?a. economies of scale.b. exploit monopolistic

Using indifference curve analysis describe how and why : assume that from the initial consumer equilibrium position price of good x falls while price of good y remains the

You expect the spot rate of pound to be 157 in 90 days : a call option exists on british pounds with an exercise price of 1.60 a 90-day expiration date and a premium of .03 per

Explain the role of green sourcing strategies in logistics : describe the role of green sourcing strategies in logistics design and how an organization may be affected by this

Fab plans to purchase options to hedge its payable position : fab corporation will need 200000 canadian dollars c in 90 days to cover a payable position. currently a 90-day call

Define and describe the difference between absolute : define and explain the difference between absolute advantage and comparative advantage. what is the significance of

Is the long-run demand for factor more or less elastic than : be sure to explain what you are doing and show your work in the numerical problems and provide a brief but complete

In january 2013 neville estimates that the machinery will : neville company bought machinery on january 1 2010 at a cost of 400000. the machinery had an estimated life of 8 years

Make a pareto chart showing the relative frequency of : consider the types of poor driving habits that might occur at a traffic light. make a list of the 10 you consider most

User Account

All Pages