Question: A US exporter expecting future receivables in CNY in one year considers hedging his foreign exchange exposure via options. Suppose a one-year put option on

A US exporter expecting future receivables in CNY in one year considers hedging his foreign exchange exposure via options. Suppose a one-year put option on the CNY with strike price equal to 0.1160 USD/CNY has a premium equal to 0.0056 USD/CNY. Assume the risk-free rate is equal to zero. What is the exchange rate at which the US exporter will be indifferent between hedging with this option contract and hedging with a forward contract with bid rate equal to 0.1160 USD/CNY?

Select one:

a. 0.1261 USD/CNY

b. 0.1216 USD/CNY

c. 0.1149 USD/CNY

d. 0.1104 USD/CNY

e. None of the other choices

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