15, Nathan Co paid 6,000 cash to acquire a put foreign exchange option FC37,500 which expires at the end of the year. The option hedges 2015's forecasted sales of FC37,500.Nathan's fiscal year ends every October 31. 1/1/15 10/31/15 12/31/15 Spot rate ( market price) 1.45. 1.20 1.30 Strike price (exercise price) 1.40 1.40 1.40 Fair value of put action 6,000 25,250 Determine the intrinsic value at inception of the option contract. 12,750

15, Nathan Co paid 6,000 cash to acquire a put foreign exchange option FC37,500 which expires at the end of the year. The option hedges 2015's forecasted sales of FC37,500.Nathan's fiscal year ends every October 31. 1/1/15 10/31/15 12/31/15 Spot rate ( market price) 1.45. 1.20 1.30 Strike price (exercise price) 1.40 1.40 1.40 Fair value of put action 6,000 25,250 Determine the intrinsic value at inception of the option contract. 12,750

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter5: Currency Derivatives

Section: Chapter Questions

Problem 26QA

See similar textbooks

Similar questions

A Katz Corporation subsidiary buys marketable equity securities and inventory on April 1, 2024, for 100,000 won each. It pays for both items on June 1, 2024, and they are still on hand at year-end. Inven- tory is carried at cost under the lower-of-cost-or-net realizable rule. Currency exchange rates in 2024 follow: January 1 April 1 June 1 December 31 ...... $0.15 1 won 0.16 = 1 0.17 = 1 0.19 = 1 10. Assume that the won is the subsidiary's functional currency. What balances does a consolidated balance sheet report as of December 31, 2024? a. Marketable equity securities = $16,000 and Inventory = $16,000 b. Marketable equity securities = $17,000 and Inventory = $17,000 c. Marketable equity securities = $19,000 and Inventory = $16,000 d. Marketable equity securities = $19,000 and Inventory = $19,000 11. Assume that the U.S. dollar is the subsidiary's functional currency. What balances does a consoli- dated balance sheet report as of December 31, 2024? a. Marketable equity securities =…
2) XYZ has cash of FC 100,000 on both April 30 and May 31, 2010. The applicable spot rates for April 30 and May 31 are as follows: April 30: 1US = 5FC May 31: 1 US= 4FC How much is the FX transaction gain or loss on May 31, 2010.
Obtain the dirty price in pesos, if on January 27, 2017 a UDIBONO is purchased that was issued at 1,092 days on November 3, 2016. The current coupon rate is 3.85% and 3.92% is quoted on the market. The transaction was settled value date 48 hours. The value of the UDI was: Answer: 100.742262
As a dealer in currency, you buy put option on euros. The written strike price on the option of $1.2000/€ at a premium of 1.75¢ per euro ($0.0175/€). The expiration date six months from now. The option is for €150,000. Calculate profit or loss should you exercise before maturity at a time when the euro is traded spot at the following: (a). $1.15/€ (b). $1.20/€ (c). $1.30/€ (d). $1.40/€
(mark-to-market) You enter a short position in a € future contract with the size of €125,000 today. The futures expire in 90 days. The interest rates are i$=5.9% and iç-6.1%. The current spot rate is $1.38/€. Assume 360 days a year. If the spot rate is $1.37% € the next day and interest rates remain the same, your profit or loss for this day is $___________ __.(Keep the sign and two decimal places.)
Consider the spot and forward FX quotes in dollars. Spot: 54.10 30-day forward: 54.90 60-day forward: 55.40 90-day forward: 56.00 On April 3, 2023, Ford enters in a 3-month long forward contract to buy $10,000,000 at ₱56.00 per 1 USD to Rangers Corporation. After 90 days, the exchange rate is at ₱58.00. How much will Ford pays at the end of the 90-day contract? Who will be the gainer and loser in the forward contract? How much did they gain and lose?
Hedging Foreign Exchange Risk On November 1, 2022, Ambrose Co. purchased inventory from a customer for 120,000 FCUs with payment to be received on April 30, 2023. At the date of sale, Ambrose entered into a forward exchange contract wherein 120,000 FCUS would be received from a currency broker in six months. The six month forward exchange rate on that date was 1 FCU = $0.52. The spot rates and forward rates on various dates were as follows: Date November 1, 2022 December 31, 2022 April 30, 2023 REQUIRED: Prepare journal entries Spot Rate $0.53= 1 FCU $0.50 = 1 FCU $0.491 FCU for this transaction Forward Rate (4/30/2023) $0.52 = 1 FCU $0.48 = 1 FCU N/A and forward contract.
On January 1, 2019, Bank Dhofar issued CD in Muscat Securities Market which will mature in October 30, 2020. The CD pays 8 % interest rate. Calculate the interest earned on this CD with face value of 100000. Assume all month to be of 30 days. Select one: a. None of these b. 4835.50 OMR C. 5325.40 OMR d. 5260.27 OMR
You Answered Correct Answer (mark-to-market) You enter a short position in a € future contract with the size of €125,000 today. The futures expire in 90 days. The interest rates are i$=5.9% and ic=6.1%. The current spot rate is $1.38/€. Assume 360 days a year. If the spot rate is $1.37/€ the next day and interest rates remain the same, your profit or loss for this day is $ ___. (Keep the sign and two decimal places.) 1,250 1,248.46 margin of error +/-0.05
On October 31, 2020, Tarling Company negotiated a one-year 100,000-franc loan from a foreign bank at an interest rate of 3% per year. Interest payments are made annually on October 31, and the principal will be repaid on October 31, 2021. Tarling prepares U.S-dollar financial statements and has a December 31 year-end. Date Franc Rate October 31, 2020 S0 49 December 31, 2020 |SO 55 October 31, 2021 S0.65 Required: Assuming the above information Prepare all journal entries related to this forelgn currency borrowing
On June 1, Alexander Corporation sold goods to a foreign customer at a price of 1,000,000 pesos and will receive payment in three months on September 1. On June 1, Alexander acquired an option to sell 1,000,000 pesos in three months at a strike price of $0.062. Relevant exchange rates and option premiums for the peso are as follows: Date Spot Rate Put option premium for September 1 (strike price $0.062) June 1 $0.062 $0.0025 June 30 0.066 0.0018 September 1 0.061 N/A Alexander must close its books and prepare its second-quarter financial statements on June 30.a. Assuming that Alexander designates the foreign currency option as a cash flow hedge of a foreign currency receivable, prepare journal entries for these transactions in U.S. dollars. What is the impact on net income over the two accounting periods?b. Assuming that Alexander designates the foreign currency option as a fair value hedge of a foreign currency receivable, prepare journal entries for these transactions in…
(mark-to-market) You enter a long position in a € future contract with the size of €125,000 today. The futures expire in 90 days. The interest rates are i$=2.6% and iç-5.5%. The current spot rate is $1.38/€. Assume 360 days a year. If the spot rate is $1.36/€ the next day and interest rates remain the same, your profit or loss for this day is $_ ____.(Keep the sign and two decimal places.)