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Pretoza Inc. has accounts payable of 841,000 euros (EUR) due in 4 months. The spot rate for euro is 2.0068 US dollars an
Posted: Thu May 19, 2022 7:03 am
by answerhappygod
- Pretoza Inc Has Accounts Payable Of 841 000 Euros Eur Due In 4 Months The Spot Rate For Euro Is 2 0068 Us Dollars An 1 (26.84 KiB) Viewed 49 times
Pretoza Inc. has accounts payable of 841,000 euros (EUR) due in 4 months. The spot rate for euro is 2.0068 US dollars and the forward rate for euro in 4 months is 2.3076 US dollars. The European call option on the euro with the same expiration date as the payable has a strike price of USD 2.2759 and a premium of USD 0.12. In the same vein, a put option on the euro with a strike price of 2.2841 has a premium of 0.12. The
company prefers to hedge its transaction exposure using financial instruments that provide flexibility. Assume that on the due date of the account payable, the spot rate is USD 1.95/EUR. The net amount paid in USD by the
company if it acts rationally would be: a. 1,639,950 .b. 1,740,870 c. 2,041,612 d. 1,459,892