QUESTION 12 2.5 points You work for StillwaterCreek corporation and the firm\'s

Question

QUESTION 12 2.5 points You work for StillwaterCreek corporation and the firm's finance department head informs you that the firm will receive 1,500,000 pounds in 2 months. You alsco have ac purchase a put option to hedge the receivables, and the option will be exercised at maturity if necessary. Find the total dollar amount your firm will receive (after accounting for the option premium) in 2 months. Exercise p Premium Spot rate 2-month forward rate Expected spot rate in 2 months$1.26 cess to the information in the accomp anying table. Your firm wants t - $1.30 $.02 - $1.25 - $1.35 rice $1,980,000 $1,920,000 $1,995,000 $1,860,000 $1,845,000

Explanation / Answer

correct option is "B" - 1920000

Amount to be received in 2 months = 1,500,000 [ 1.30 - .02 premium]

                       = 1,500,000 *1.28

                       = 1,920,000

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