Show how many u.s. dollars crown co. would receive

Reference no: EM13263669

Crown Co. is expecting to receive 100,000 British pounds in one year. Crown expects the spot rate to be 1.49 in a year, so it decides to avoid exchange rate risk by hedging its receivables. The spot rate of the pound is quoted at $1.51. The strike price of put and call options are $1.54 and $1.53, respectively. The premium on both options is $.03. The one-year forward rate exhibits a 2.65% premium. Assume there are no transaction costs. Given the information above, what financial tool(s) would be the best available for hedging? Show how many U.S. dollars Crown Co. would receive, net of cost, under each of the tools you have just identified.

Reference no: EM13263669

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