A firm wants to use an option to hedge 10.5 million in receivables from Irish firms....
A firm wants to use an option to hedge 10.5 million in receivables from Irish firms. The premium is $.02. The exercise price is $.50. If the option is exercised, what is the total amount of dollars received (after accounting for the premium paid)?
Homework Answers
Net amount of dollar received per unit=Excercise price - premium
=0.5 - 0.02=0.48
Total amount of dollar received= Number of units * net dollar received per unit= 10.5 million * 0.48 = $ 5040000 or 5.04 million
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