The premium for September 19th call option on Canadian dollar is $0.04, and the strike price is $0.80. Assume that on September 19 the spot rate for the Canadian dollar rose to $0.92. What is the USD cost of interest payment for ABC Inc. ?

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Question 1 TABLE 8.1 Use the table to answer following question(s). April 19, 2009, British Pound Option Prices (cents per pound, 62,500 pound contracts). Refer to Table 8.1. The exercise price of ________ giving the purchaser the right to sell pounds in June has a cost per pound of ________ for a total price of ________. 1440; 1.06 cents; $662.50 1440; 1.42 cents; $887.50 1460; 0.68 cents; $425.00 1450; 1.02 cents; $637.50 Question 2 A speculator that has ________ a futures contract has taken a ________ position. purchased; sold purchased; short sold; short sold; long Question 3 1. ABC Inc. has CAD20,000,000 interest payment due on September 19th and is concerned about a possible CAD appreciation. The premium for September 19th call option on Canadian dollar is $0.04, and the strike price is $0.80. Assume that on September 19 the spot rate for the Canadian dollar rose to $0.92. What is the USD cost of interest payment for ABC Inc. ? 20,000,000 16,800,000 15,400,000 12,000,000 Question 4 Dash Brevenshure works for the currency trading unit of ING Bank in London. He speculates that in the coming months the dollar will rise sharply vs. the pound. What should Dash do to act on his speculation? Buy a call on the pound. Sell a put on the pound. Buy a put on the pound. Sell a call on the pound. Question 5 Firm "M" is a U.S. company that has exposure to the Swiss francs (SF) and Danish kroner (DK). It has net outflows of SF200 million and net inflows of DK500 million. The present exchange rate of the SF is about $.40 while the present exchange rate of the DK is $.20. Firm "M" has not hedged these positions. The SF and DK are highly correlated in their movements against the dollar. If the dollar weakens: firm "M" will benefit, because the dollar value of its SF position exceeds the dollar value of its DK position firm "M" will benefit, because the dollar value of its DK position exceeds the dollar value of its SF position. firm "M" will be adversely affected, because the dollar value of its SF position exceeds the dollar value of its DK position. firm "M" will be adversely affected, because the dollar value of its DK position exceeds the dollar value of its SF position Question 6 Option delta measures____________. Sensitivity of option premium to change in the exchange rate Sensitivity of option premium to change in the volatility Sensitivity of option premium to change in risk free interest rate differential none of the above Question 7 A call option on UK pounds has a strike price of $2.05/ and a cost of $0.02. What is the breakeven price for the option? $2.05/ $2.07/ $2.03/ The answer depends upon if this is a long or a short call option. Question 8 A U.S. firm with no subsidiaries presently has sales to Brazil amounting to R200 million, while its Real -denominated expenses amount to R100 million. If it shifts its material orders from its Brazilian suppliers to U.S. suppliers, it could reduce Real-denominated expenses by R20 million and increase dollar-denominated expenses by $15 million. This strategy would _______ the firm's exposure to changes in the Real's movements against the U.S. dollar. Regardless of whether the firm shifts expenses, it is likely to perform better when the Real is valued _______ relative to the dollar. reduce; high reduce; low increase; low increase; high Question 9 Suppose you work for Citicorp South Korea. A local bank wanted to buy USD50,000,000 one month forward. Since you think Korea is a risky environment you need to built 2% margin (monthly) in your forward price to account for risk. Current spot and one month interest rates in USD and Korean Won are as follows. What would be your forward quote? USD/KRW 685-700 Rusd: 7.50-8.50 p.a. (these interest rates are annualized) Rkrw:35.00-45.00% p.a. (these interest rates are annulized) a. 736 b. 722 c. 913.5 d. none of the above 736 722 913.5 none of the above Question 10 Suppose you work for XYZ Bank. A customer who wants to buy GBP 6-months forward approached you. What is the forward rate that you would quote if your bank requires 1% flat profit over the breakeven rate? (You can round your results to third decimal and mark the closest answer) GBP/USD 1.6500-1.6580 RUSD: 5.50-6.50% pa RGBP:9.00-10.00%pa 1.6382 1.5866 1.6545 1.6020 Question 11 Jack Hemmings bought a 3-month British pound futures contract for $1.4400/ only to see the dollar appreciate to a value of $1.4250 at which time he sold the pound futures. If each pound futures contract is for an amount of 62,500, how much money did Jack gain or lose from his speculation with pound futures? 937.50 gain 937.50 loss $937.50 loss $937.50 gain Question 12 Jasper Pernik is a currency speculator who enjoys "betting" on changes in the foreign currency exchange market. Currently the spot price for the Japanese yen is 129.87/$ and the 6-month forward rate is 128.53/$. Jasper thinks the yen will move to 128.00/$ in the next six months. If Jasper buys $100,000 worth of yen at today's spot price and sells within the next six months at 128/$, he will earn a profit of: $101,460.94 $146.09 $1460.94 nothing; he will lose money Question 13 Peter Simpson thinks that the U.K. pound will cost $1.43/ in six months. A 6-month currency futures contract is available today at a rate of $1.44/. If Peter was to speculate in the currency futures market, and his expectations are correct, which of the following strategies would earn him a profit? Sell pounds today. Buy a pound currency futures contract. Sell pounds in six months. Sell a pound currency futures contract. Question 14 A speculator in the futures market wishing to lock in a price at which they could ________ a foreign currency will ________ a futures contract. buy; buy sell; buy buy; sell none of the above Question 15 Plains States Manufacturing has just signed a contract to sell agricultural equipment to Boschin, a German firm, for 1,250,000. The sale was made in June with payment due six months later in December. Because this is a sizable contract for the firm and because the contract is in Euros rather than dollars, Plains States is considering several hedging alternatives to reduce the exchange rate risk arising from the sale. To help the firm make a hedging decision you have gathered the following information. The spot exchange rate is $1.1740/ The six month forward rate is $1.1480/ Plains States' cost of capital is 12% per annum The Euro zone 6-month borrowing rate is 7% per annum (or 3.5% for 6 months) The Euro zone 6-month lending rate is 5% per annum (or 2.5% for 6 months) The U.S. 6-month borrowing rate is 6% per annum (or 3% for 6 months) The U.S. 6-month lending rate is 4.5% per annum (or 2.25% for 6 months) December put options for 625,000; strike price $1.18, premium price is 1.5% Plains States' forecast for 6-month spot rates is $1.19/ The budget rate, or the lowest acceptable sales price for this project, is $1,425,000 or $1.14/ Plains States chooses to hedge its transaction exposure in the forward market at the available forward rate. The payoff in 6 months will be ________. $1,435,000 $1,467,500 $1,125,000 $1,425,000 Question 15 Plains States Manufacturing has just signed a contract to sell agricultural equipment to Boschin, a German firm, for 1,250,000. The sale was made in June with payment due six months later in December. Because this is a sizable contract for the firm and because the contract is in Euros rather than dollars, Plains States is considering several hedging alternatives to reduce the exchange rate risk arising from the sale. To help the firm make a hedging decision you have gathered the following information. The spot exchange rate is $1.1740/ The six month forward rate is $1.1480/ Plains States' cost of capital is 12% per annum The Euro zone 6-month borrowing rate is 7% per annum (or 3.5% for 6 months) The Euro zone 6-month lending rate is 5% per annum (or 2.5% for 6 months) The U.S. 6-month borrowing rate is 6% per annum (or 3% for 6 months) The U.S. 6-month lending rate is 4.5% per annum (or 2.25% for 6 months) December put options for 625,000; strike price $1.18, premium price is 1.5% Plains States' forecast for 6-month spot rates is $1.19/ The budget rate, or the lowest acceptable sales price for this project, is $1,425,000 or $1.14/ Plains States chooses to hedge its transaction exposure in the forward market at the available forward rate. The payoff in 6 months will be ________. $1,435,000 $1,467,500 $1,125,000 $1,425,000 Question 16 Plains States Manufacturing has just signed a contract to sell agricultural equipment to Boschin, a German firm, for 1,250,000. The sale was made in June with payment due six months later in December. Because this is a sizable contract for the firm and because the contract is in Euros rather than dollars, Plains States is considering several hedging alternatives to reduce the exchange rate risk arising from the sale. To help the firm make a hedging decision you have gathered the following information. The spot exchange rate is $1.1740/ The six month forward rate is $1.1480/ Plains States' cost of capital is 12% per annum The Euro zone 6-month borrowing rate is 7% per annum (or 3.5% for 6 months) The Euro zone 6-month lending rate is 5% per annum (or 2.5% for 6 months) The U.S. 6-month borrowing rate is 6% per annum (or 3% for 6 months) The U.S. 6-month lending rate is 4.5% per annum (or 2.25% for 6 months) December put options for 625,000; strike price $1.18, premium price is 1.5% Plains States' forecast for 6-month spot rates is $1.19/ The budget rate, or the lowest acceptable sales price for this project, is $1,425,000 or $1.14/ If Plains States chooses not to hedge their euro receivable, the amount they receive in six months will be ________. undeterminable today $1,115,500 $1,137,500 $1,125,000 Question 17 Which of the following is NOT a difference between a currency futures contract and a forward contract? A single sales commission covers both the purchase and sale of a futures contract, whereas there is no specific sales commission with a forward contract because banks earn a profit through the bid-ask spread. The futures contract is marked to market daily, whereas the forward contract is only due to be settled at maturity. The counterparty to the futures participant is unknown with the clearinghouse stepping into each transaction, whereas the forward contract participants are in direct contact setting the forward specifications. All of the above are true. Question 18 Use the following spot and interest rates to answer the following question: EUR/USD1.2310-1.2340 R-USD-3-months: 3.00%-3.25% pa R-EUR-3-months: 4.00%-4.50% pa Assume that you are a banker who have access to the above rates. What EUR/USD rate would you quote for an exporter who is interested hedging its EUR100m cash inflows due in three months? 1.2272 1.2242 1.2251 1.2264 Question 19 A foreign currency ________ option gives the holder the right to ________ a foreign currency, whereas a foreign currency ________ option gives the holder the right to ________ an option. call, buy, put, sell put, hold, call, release call, sell, put, buy none of the above Question 20 A U.S. company wants to use a currency put option to hedge 10 million French francs in accounts receivable. The premium of the currency put option with a strike price of $0.20 is $0.05.If the option is exercised, the total amount of dollars received after accounting for the premium payment is $____. (Please ignore the time value of premium) 1,500,000 2,000,000 2,500,000 3,000,0000 Question 21 Which of the following statements regarding currency futures contracts and forward contracts is NOT true? A futures contract is a standardized amount per currency whereas the forward contact is for any size desired. Futures contracts trade on organized exchanges whereas forwards take place between individuals and banks with other banks via telecom linkages. A futures contract is for a fixed maturity whereas the forward contract is for any maturity you like up to one year. All of the above are true. Question 22 Assume that a EURO Call option trades at $0.05. The strike price of the option is $0.9200 and the current spot rate is $0.9203. A Euro forward contract that expires at the same time with the option is at $0.9195. Use this information to determine which one of the following is not a correct statement. Time value of the option is $0.0497 US dollar interest rate is lower than Euro interest rate Intrinsic value of the option is $0.03 The call option price is expected to increase if USD interest rate increases Question 23 A put option on yen is written with a strike price of 105.00/$. Which spot price maximizes your profit if you choose to exercise the option before maturity? 100/$ 110/$ 115/$ 105/$ Question 24 A US importer, who incurs costs in Euro's and bills its customers in USD, is concerned about the depreciation of USD against Euro due to EURO payables of 10,000,000 in a month. To hedge (protect himself/herself) the position, importer decides to use futures markets. Currently EURO contracts (125,000 EURO each) are traded at $0.8470. Spot rate is $0.8310 (ie EUR/USD 0.8310). Suppose the importer takes an equal futures position to its cash market position (Euro10m) at $0.8470. Assume that futures contract price and spot rates are $0.8600, $0.8540 respectively when the hedge is liquidated. What should be the unit cost of EURO for the importer in terms of USD? 0.8600 0.8540 0.8670 0.8410 Question 25 A U.S. corporation has purchased currency call options to hedge a 70,000 pound payable. The premium is $.02 and the exercise price of the option is $.50. If the spot rate at the time of maturity is $.65, what is the total amount paid by the corporation if it acts rationally? (Please ignore the time value of premium) $33,600. 46,900 36,400 44,100 \fQuestion 1 TABLE 8.1 Use the table to answer following question(s). April 19, 2009, British Pound Option Prices (cents per pound, 62,500 pound contracts). Refer to Table 8.1. The exercise price of ________ giving the purchaser the right to sell pounds in June has a cost per pound of ________ for a total price of ________. 1440; 1.06 cents; $662.50 1440; 1.42 cents; $887.50 1460; 0.68 cents; $425.00 1450; 1.02 cents; $637.50 Question 2 A speculator that has ________ a futures contract has taken a ________ position. purchased; sold purchased; short sold; short sold; long Question 3 1. ABC Inc. has CAD20,000,000 interest payment due on September 19th and is concerned about a possible CAD appreciation. The premium for September 19th call option on Canadian dollar is $0.04, and the strike price is $0.80. Assume that on September 19 the spot rate for the Canadian dollar rose to $0.92. What is the USD cost of interest payment for ABC Inc.? Increase in price = $0.92-$0.80= $0.12 20,000,000/1.29 20,000,000 16,800,000 15,400,000 12,000,000 Question 4 Dash Brevenshure works for the currency trading unit of ING Bank in London. He speculates that in the coming months the dollar will rise sharply vs. the pound. What should Dash do to act on his speculation? Buy a call on the pound. Sell a put on the pound. Buy a put on the pound. Sell a call on the pound. Question 5 Firm "M" is a U.S. company that has exposure to the Swiss francs (SF) and Danish kroner (DK). It has net outflows of SF200 million and net inflows of DK500 million. The present exchange rate of the SF is about $.40 while the present exchange rate of the DK is $.20. Firm "M" has not hedged these positions. The SF and DK are highly correlated in their movements against the dollar. If the dollar weakens: firm "M" will benefit, because the dollar value of its SF position exceeds the dollar value of its DK position firm "M" will benefit, because the dollar value of its DK position exceeds the dollar value of its SF position. firm "M" will be adversely affected, because the dollar value of its SF position exceeds the dollar value of its DK position. firm "M" will be adversely affected, because the dollar value of its DK position exceeds the dollar value of its SF position Question 6 Option delta measures____________. Sensitivity of option premium to change in the exchange rate Sensitivity of option premium to change in the volatility Sensitivity of option premium to change in risk free interest rate differential none of the above Question 7 A call option on UK pounds has a strike price of $2.05/ and a cost of $0.02. What is the breakeven price for the option? $2.05+$0.02=$2.07 per share/euro $2.05/ $2.07/ $2.03/ The answer depends upon if this is a long or a short call option. Question 8 A U.S. firm with no subsidiaries presently has sales to Brazil amounting to R200 million, while its Real -denominated expenses amount to R100 million. If it shifts its material orders from its Brazilian suppliers to U.S. suppliers, it could reduce Real-denominated expenses by R20 million and increase dollar-denominated expenses by $15 million. This strategy would _______ the firm's exposure to changes in the Real's movements against the U.S. dollar. Regardless of whether the firm shifts expenses, it is likely to perform better when the Real is valued _______ relative to the dollar. reduce; high reduce; low increase; low increase; high Question 9 Suppose you work for Citicorp South Korea. A local bank wanted to buy USD50,000,000 one month forward. Since you think Korea is a risky environment you need to built 2% margin (monthly) in your forward price to account for risk. Current spot and one month interest rates in USD and Korean Won are as follows. What would be your forward quote? USD/KRW 685-700 Rusd: 7.50-8.50 p.a. (these interest rates are annualized) Rkrw:35.00-45.00% p.a. (these interest rates are annulized) a. 736 b. 722 c. 913.5 d. none of the above One-month forward quote = {700 * [(1 + 45%/12) / (1 + 8.5%/12)]} * 102% = $736 736 722 913.5 none of the above Question 10 Suppose you work for XYZ Bank. A customer who wants to buy GBP 6-months forward approached you. What is the forward rate that you would quote if your bank requires 1% flat profit over the breakeven rate? (You can round your results to third decimal and mark the closest answer) GBP/USD 1.6500-1.6580 RUSD: 5.50-6.50% pa RGBP:9.00-10.00%pa 1.6382 1.5866 1.6545 1.6020 Question 11 Jack Hemmings bought a 3-month British pound futures contract for $1.4400/ only to see the dollar appreciate to a value of $1.4250 at which time he sold the pound futures. If each pound futures contract is for an amount of 62,500, how much money did Jack gain or lose from his speculation with pound futures? (1.44 1.425) *62500 = 937.50 937.50 gain 937.50 loss $937.50 loss $937.50 gain Question 12 Jasper Pernik is a currency speculator who enjoys "betting" on changes in the foreign currency exchange market. Currently the spot price for the Japanese yen is 129.87/$ and the 6-month forward rate is 128.53/$. Jasper thinks the yen will move to 128.00/$ in the next six months. If Jasper buys $100,000 worth of yen at today's spot price and sells within the next six months at 128/$, he will earn a profit of: $101,460.94 $146.09 $1460.94 nothing; he will lose money Question 13 Peter Simpson thinks that the U.K. pound will cost $1.43/ in six months. A 6-month currency futures contract is available today at a rate of $1.44/. If Peter was to speculate in the currency futures market, and his expectations are correct, which of the following strategies would earn him a profit? Sell pounds today. Buy a pound currency futures contract. Sell pounds in six months. Sell a pound currency futures contract. Question 14 A speculator in the futures market wishing to lock in a price at which they could ________ a foreign currency will ________ a futures contract. buy; buy sell; buy buy; sell none of the above Question 15 Plains States Manufacturing has just signed a contract to sell agricultural equipment to Boschin, a German firm, for 1,250,000. The sale was made in June with payment due six months later in December. Because this is a sizable contract for the firm and because the contract is in Euros rather than dollars, Plains States is considering several hedging alternatives to reduce the exchange rate risk arising from the sale. To help the firm make a hedging decision you have gathered the following information. The spot exchange rate is $1.1740/ The six month forward rate is $1.1480/ Plains States' cost of capital is 12% per annum The Euro zone 6-month borrowing rate is 7% per annum (or 3.5% for 6 months) The Euro zone 6-month lending rate is 5% per annum (or 2.5% for 6 months) The U.S. 6-month borrowing rate is 6% per annum (or 3% for 6 months) The U.S. 6-month lending rate is 4.5% per annum (or 2.25% for 6 months) December put options for 625,000; strike price $1.18, premium price is 1.5% Plains States' forecast for 6-month spot rates is $1.19/ The budget rate, or the lowest acceptable sales price for this project, is $1,425,000 or $1.14/ Plains States chooses to hedge its transaction exposure in the forward market at the available forward rate. The payoff in 6 months will be ________. $1,435,000 $1,467,500 $1,125,000 $1,425,000 Question 15 Plains States Manufacturing has just signed a contract to sell agricultural equipment to Boschin, a German firm, for 1,250,000. The sale was made in June with payment due six months later in December. Because this is a sizable contract for the firm and because the contract is in Euros rather than dollars, Plains States is considering several hedging alternatives to reduce the exchange rate risk arising from the sale. To help the firm make a hedging decision you have gathered the following information. The spot exchange rate is $1.1740/ The six month forward rate is $1.1480/ Plains States' cost of capital is 12% per annum The Euro zone 6-month borrowing rate is 7% per annum (or 3.5% for 6 months) The Euro zone 6-month lending rate is 5% per annum (or 2.5% for 6 months) The U.S. 6-month borrowing rate is 6% per annum (or 3% for 6 months) The U.S. 6-month lending rate is 4.5% per annum (or 2.25% for 6 months) December put options for 625,000; strike price $1.18, premium price is 1.5% Plains States' forecast for 6-month spot rates is $1.19/ The budget rate, or the lowest acceptable sales price for this project, is $1,425,000 or $1.14/ Plains States chooses to hedge its transaction exposure in the forward market at the available forward rate. The payoff in 6 months will be ________. $1,435,000 $1,467,500 $1,125,000 $1,425,000 Question 16 Plains States Manufacturing has just signed a contract to sell agricultural equipment to Boschin, a German firm, for 1,250,000. The sale was made in June with payment due six months later in December. Because this is a sizable contract for the firm and because the contract is in Euros rather than dollars, Plains States is considering several hedging alternatives to reduce the exchange rate risk arising from the sale. To help the firm make a hedging decision you have gathered the following information. The spot exchange rate is $1.1740/ The six month forward rate is $1.1480/ Plains States' cost of capital is 12% per annum The Euro zone 6-month borrowing rate is 7% per annum (or 3.5% for 6 months) The Euro zone 6-month lending rate is 5% per annum (or 2.5% for 6 months) The U.S. 6-month borrowing rate is 6% per annum (or 3% for 6 months) The U.S. 6-month lending rate is 4.5% per annum (or 2.25% for 6 months) December put options for 625,000; strike price $1.18, premium price is 1.5% Plains States' forecast for 6-month spot rates is $1.19/ The budget rate, or the lowest acceptable sales price for this project, is $1,425,000 or $1.14/ If Plains States chooses not to hedge their euro receivable, the amount they receive in six months will be ________. undeterminable today $1,115,500 $1,137,500 $1,125,000 Question 17 Which of the following is NOT a difference between a currency futures contract and a forward contract? A single sales commission covers both the purchase and sale of a futures contract, whereas there is no specific sales commission with a forward contract because banks earn a profit through the bid-ask spread. The futures contract is marked to market daily, whereas the forward contract is only due to be settled at maturity. The counterparty to the futures participant is unknown with the clearinghouse stepping into each transaction, whereas the forward contract participants are in direct contact setting the forward specifications. All of the above are true. Question 18 Use the following spot and interest rates to answer the following question: EUR/USD1.2310-1.2340 R-USD-3-months: 3.00%-3.25% pa R-EUR-3-months: 4.00%-4.50% pa Assume that you are a banker who have access to the above rates. What EUR/USD rate would you quote for an exporter who is interested hedging its EUR100m cash inflows due in three months? Threemonth forward quote = 1.2310 * [(1 + 3%*3/12) / (1 + 4%*3/12)] = $1.2272 1.2272 1.2242 1.2251 1.2264 Question 19 A foreign currency ________ option gives the holder the right to ________ a foreign currency, whereas a foreign currency ________ option gives the holder the right to ________ an option. call, buy, put, sell put, hold, call, release call, sell, put, buy none of the above Question 20 A U.S. company wants to use a currency put option to hedge 10 million French francs in accounts receivable. The premium of the currency put option with a strike price of $0.20 is $0.05.If the option is exercised, the total amount of dollars received after accounting for the premium payment is $____. (Please ignore the time value of premium) Total receipts = FF10,000,000 x $0.20 = $2,000,000 total premium = FF10,000,000 x $0.05 = $ 500,000 net receipts = 1,500,000 2,000,000 2,500,000 3,000,0000 $1,500,000 Question 21 Which of the following statements regarding currency futures contracts and forward contracts is NOT true? A futures contract is a standardized amount per currency whereas the forward contact is for any size desired. Futures contracts trade on organized exchanges whereas forwards take place between individuals and banks with other banks via telecom linkages. A futures contract is for a fixed maturity whereas the forward contract is for any maturity you like up to one year. All of the above are true. Question 22 Assume that a EURO Call option trades at $0.05. The strike price of the option is $0.9200 and the current spot rate is $0.9203. A Euro forward contract that expires at the same time with the option is at $0.9195. Use this information to determine which one of the following is not a correct statement. Time value of the option is $0.0497 US dollar interest rate is lower than Euro interest rate Intrinsic value of the option is $0.03 The call option price is expected to increase if USD interest rate increases Question 23 A put option on yen is written with a strike price of 105.00/$. Which spot price maximizes your profit if you choose to exercise the option before maturity? The correct answer is115/$ because when you convert strike price of 105.00/$ in dollars, the rate is $0.009/and then when you convert 115/$, you get $0.008/ which is lower market price. To maximize profit, you need to exercise the option when the market price in your currency is lower than the strike price 100/$ 110/$ 115/$ 105/$ Question 24 A US importer, who incurs costs in Euro's and bills its customers in USD, is concerned about the depreciation of USD against Euro due to EURO payables of 10,000,000 in a month. To hedge (protect himself/herself) the position, importer decides to use futures markets. Currently EURO contracts (125,000 EURO each) are traded at $0.8470. Spot rate is $0.8310 (ie EUR/USD 0.8310). Suppose the importer takes an equal futures position to its cash market position (Euro10m) at $0.8470. Assume that futures contract price and spot rates are $0.8600, $0.8540 respectively when the hedge is liquidated. What should be the unit cost of EURO for the importer in terms of USD? 0.8600 0.8540 0.8670 0.8410 Question 25 A U.S. corporation has purchased currency call options to hedge a 70,000-pound payable. The premium is $.02 and the exercise price of the option is $.50. If the spot rate at the time of maturity is $.65, what is the total amount paid by the corporation if it acts rationally? (Please ignore the time value of premium) Dollars paid when exercising the option= poud70,000*$0.50=$35,000. Premium paid for options =Pound 70,000*$0.02=$1,4000. Amount of dollars paid is =$35,000+$1,4000=$36,400 $33,600. 46,900 36,400 44,100