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vodomira [7]
3 years ago
14

A firm wants to use an option to hedge 12.5 million in receivables from New Zealand firms.The premium is $.03. The exercise pric

e is $.55. If the option is exercised, what is the totalamount of dollars received (after accounting for the premium paid)?a. $6,875,000.b. $7,250,000. c. $7,000,000.d. $6,500,000.e. none of the above
Business
1 answer:
morpeh [17]3 years ago
3 0

Answer:

d. $6,500,000 dollars

Explanation:

Hedging is a strategy used by investment firms that want to minimize the risk of loosing their investments, so what they basically do is giving up the actions and investments and get some money in return, the exercise price is what they will pay you for your total investment, and the premium fee is somthing you have to pay to hedge an investment:

So you multiply the 12.5 million by .55 which is the amount you´ll receive, and withdraw form that the premium:

12,500,000x.55=$6,875,000

12,500,000x.03=$375,000

$6.875,000-$375,000= $6,500,000

The firm will receive $6,500,000 dollars.

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7 0
2 years ago
Liam​ O'Kelly is 20 years old and is thinking about buying a term life insurance policy with his wife as the beneficiary. The qu
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Because the future value of annual premiums deposited in a mutual fund is 755 (F/A, 9%, 45) = $397,023.34, Then, the friend is correct since the mutual fund is roughly three times the sum under the Insurance policy.

<h3>Was Liam's suggestion correct?</h3>

Generally, Premium  payment is mathematically given as

X=60-20

X=45years

Where future value is

755 (F/A, 9%, 45)

In conclusion

755 (F/A, 9%, 45)  = 755 * 525.8587

755 (F/A, 9%, 45) = $397,023.34

Read more about Arithmetic

brainly.com/question/22568180

Complete Question

Liam O'Kelly is 20 years old and is thinking about buying a term life insurance policy with his wife as the beneficiary. The quoted annual premium for Liam is $8.39 per thousand dollars of insurance coverage Because Liam wants a $90,000 policy (which is 2.5 times his annual salary), the annual premium would be $755, with the first payment due immediately (i.e., at age 21). A friend of Liam's suggests that the $755 annual premium should be deposited in a good mutual fund rather than in the insurance policy. "If the mutual fund earns 9% per year, you can become a millionaire by the time you retire at age 65," the friend advises.

3 0
2 years ago
If the demand for insulin is inelastic, an increase in insulin prices leads to
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Extent to which the demand<span> for a good changes when income changes.</span>
6 0
3 years ago
Purchased goods for $4,100 from Diamond Inc. with terms 2/10, n/30. 5 Returned goods costing $1,100 to Diamond Inc. for credit o
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Answer: $3,940

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Purchase from Club

Discount period expired so the full $1,000 is paid.

Total inventory cost:

= 2,940 + 1,000

= $3,940

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Selling a product abroad for less than the cost of production is referred to as
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The answer would be A because they are basically dumping  the product on the other country
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