Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. 3. a u.s. importer has to make a euro500,000 payme

3. A U.S. importer has to make a euro500,000 payment to an Italian exporter in 60...

90.2K

Verified Solution

Question

Finance

3. A U.S. importer has to make a euro500,000 payment to anItalian exporter in 60 days. They decide to purchase a Europeancall option on euros with the following details:

• Contract size: euro250,000

• Exercise price: $1.45/euro

• Call option premium: $0.04 per euro

What is the overall profit/loss given the following future spotrates? Should the importer exercise the option in eachscenario?

A) $1.40/euro

B) $1.45/euro

C) $1.49/euro

D) $1.52/euro

Answer & Explanation Solved by verified expert
3.7 Ratings (622 Votes)
The importer has euro payables worth 500000 due in 60 days This implies that the importer will need to purchase euros after 60 days Buying a call option would allow the importer to purchase these euros    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

3. A U.S. importer has to make a euro500,000 payment to anItalian exporter in 60 days. They decide to purchase a Europeancall option on euros with the following details:• Contract size: euro250,000• Exercise price: $1.45/euro• Call option premium: $0.04 per euroWhat is the overall profit/loss given the following future spotrates? Should the importer exercise the option in eachscenario?A) $1.40/euroB) $1.45/euroC) $1.49/euroD) $1.52/euro

Other questions asked by students

Q

a. Define demography including size, compositions, and distribution. b. Describe world population patterns. c. Examine historical and contemporary...

Psychology
Q

Two of the three electrons in a lithium atom have quantum numbers of n = 1,...

Physics
Q

First google information on Green HR initiatives and then research for information on how a company...

General Management
Q

Exercise 21A-1 a Splish Brothers enters into an agreement with Traveler Inc. to lease a car...

Accounting
Q

You surveyed the number of tree species along the American River watershed and obtain the...

Biology
Q

If a EM wave traveling in vacuum in y direction has magnetic field B 8...

Physics
Q

Two concentric metallic shell s of radius R and 2R out of which the inner...

Physics
Q

The concentration C of a chemical in the bloodstream t hours after injection into muscle...

Calculus
Q

A scientist needs to make 5 4 liters of saline solution salt water in which...

Algebra
Q

$6,000,000 Sales (400,000 units) Costs and expenses Direct materials Direct labor Overhead Selling expenses Administrative...

Accounting
Q

The 2021 Income statement of Adrian Express reports sales of $13,500,000, cost of goods sold...

Accounting
Q

Melanie's partially completed Schedule A, Itemized Deductions, is shown below. Given the adjusted gross income...

Accounting