A US firm exports a product to Brazil (currency: BRL) for BRL 7,877,869. The US firm...
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A US firm exports a product to Brazil (currency: BRL) for BRL 7,877,869. The US firm has a contract to receive payment from the Brazilian purchaser in 1 year. The current spot rate is USD0.23 - 1 BRL. The US firm is considering hedging the entire contract with an options hedge. A call option on the BRL with a strike price of $0.182/BRL is available for a premium of $0.036 per BRL. A put option on the BRL with a strike price of $0.187/BRL is available for a premium of $0.062 per BRL. Suppose that the US firm purchases the option. Suppose further that the spot price on the day the US firm receives payment from the Brazilian firm is $0.16/BRL. How many dollars does the US firm receive from its payment? Do not include the option premium. 212.702 A US firm exports a product to Brazil (currency: BRL) for BRL 7,877,869. The US firm has a contract to receive payment from the Brazilian purchaser in 1 year. The current spot rate is USD0.23 - 1 BRL. The US firm is considering hedging the entire contract with an options hedge. A call option on the BRL with a strike price of $0.182/BRL is available for a premium of $0.036 per BRL. A put option on the BRL with a strike price of $0.187/BRL is available for a premium of $0.062 per BRL. Suppose that the US firm purchases the option. Suppose further that the spot price on the day the US firm receives payment from the Brazilian firm is $0.16/BRL. How many dollars does the US firm receive from its payment? Do not include the option premium. 212.702
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Related Book For
International Financial Management
ISBN: 978-0078034657
6th Edition
Authors: Cheol S. Eun, Bruce G.Resnick
Posted Date:
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