Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. pretoza inc. has accounts payable of 841,000 euros

Pretoza Inc. has accounts payable of 841,000 euros (EUR) due in 4 months. The spot...

50.1K

Verified Solution

Question

Finance

image
Pretoza Inc. has accounts payable of 841,000 euros (EUR) due in 4 months. The spot rate for euro is 2.0068 US dollars and the forward rate for euro in 4 months is 2.3076 US dollars. The European call option on the euro with the same expiration date as the payable has a strike price of USD 2.2759 and a premium of USD 0.12. In the same vein, a put option on the euro with a strike price of 2.2841 has a premium of 0.12. The company prefers to hedge its transaction exposure using financial instruments that provide flexibility. Assume that on the due date of the account payable, the spot rate is USD 1.95/EUR. The net amount paid in USD by the company if it acts rationally would be: a. 1,639,950 .b. 1,740,870 c. 2,041,612 d. 1,459,892

Answer & Explanation Solved by verified expert
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

Other questions asked by students

Q

How does corporate culture and tone at the top affect fraud and abuse within an organization?

Accounting
Q

What are the central tenets of the Combahee River Collective Statement?

Psychology
Q

In regards to the Coronavirus .state  why false negative matters to you (i.e., why you need to be...

General Management
Q

eing 65 years or older is a risk factor for Alzheimer s disease 5 True

Biology
Q

Two identical bar magnets are suspended first with like poles on each other and then...

Physics
Q

35 The fundamental frequency of a sonometer wire of length lis fo A bridge is...

Physics
Q

Johnson Enterprises uses a computer to handle its sales invoices. Lately, business has been so...

Accounting
Q

Allowing transactions in the two-column journal May 1 Susan invested $5,000 cash to start the...

Accounting
Q

SER jeans maker is designing a new line of jeans. These jeans will sell for...

Accounting
Q

Choose TRUE or FALSE as applicable next to each of the following items as they...

Accounting
Q

Merchandise costing $2,950 was sold for $5,500 in cash. How would this be journalized, using...

Accounting
Q

Kindly answer asap. I will thumbs up your work if you do ...

Finance