A Canadian company exports goods to Chile. The goods will be shipped from Canada immediately, but the Chilean importer is given a six-month credit period. The value of the goods sold is CLP3 million. 

Additional Information 

CAD/CLP spot rate                                                629.6700
Forecast spot CAD/CLP (in six months)                629.6850
Option premium cost                                              2%
Option strike price (equal to spot rate)                   629.6700
 

1. If the forecast is correct, how many CAD would the Canadian exporter receive if the company decided to bear the risk for the six-month period? 
2. 
   
3. If the exporter decided to purchase an option, would the company purchase a CLP call option or a CLP put option? Provide an explanation for your answer.
4. 
   
5. Assuming the exporter purchased an appropriate option at a strike price of CAD/CLP 629.6700, and after six months the CAD/CLP spot rate was 629.6550, would the exporter exercise the option or not? Explain your answer. How much (in CAD) would the exporter receive as a result of this total export transaction?

Answer rating: 100% (QA)

To calculate how many CAD the Canadian exporter would receive if they decided to bear the risk for t... View the full answer