Question: Microsoft is bidding for a contract to sell computers to South Africa for 1 7 m South African Rands ( ZAR ) . To hedge

Microsoft is bidding for a contract to sell computers to South Africa for 17m South African Rands (ZAR). To hedge its transaction exposure, MSFT buys put options with strike price of $ 0.065/ ZAR and put premium of $ 0.002/ ZAR.
If at expiration the spot exchange rate is $ 0.061/ZAR, how many dollars will Microsoft receive for winning and fulfilling the contract (factoring in the hedge position)?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!