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CTP · Question #525
(Topic 6) A U.S. company that is expecting to receive a payment of C$1,000,000 purchased a put option of C$1,000,000 at a strike price of 1.75 C$/US$. Two days before the receipt of the payment, the…
The correct answer is B. Exercise its put option. See the full explanation below for the reasoning.
Question
- (Topic 6)
A U.S. company that is expecting to receive a payment of C$1,000,000 purchased a put option of C$1,000,000 at a strike price of 1.75 C$/US$. Two days before the receipt of the payment, the spot rate is 1.85 C$/US$. To maximize its receipt of dollars, the company should do which of the following?
Options
- BExercise its put option.
- CPurchase a call option at 1.85.
- DPurchase a spot contract at 1.85.
How the community answered
(33 responses)- B79% (26)
- C9% (3)
- D12% (4)
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