Question

Spears Co. will receive SF1,000,000 in 30 days. Use the following information to determine the total dollar amount received (after accounting for the option premium) if the firm purchases and exercises a put option: Exercise price = $.61 Premium = $.02 Spot rate = $.60 Expected spot rate in 30 days = $.56 30-day forward rate = $.62

Answer 1

Answer:

Step-by-step explanation

Given that,

Spear Co will receive SF1,000,000 after 30days

Exercise price = $.61

Premium = $.02

Spot rate = $.60

Expected spot rate in 30 days = $.56

30-day forward rate = $.62

The total dollar receive will be

(Exercise Price -premium)× received

($.61 − $.02) × SF1,000,000 = $590,000