Suppose a Japanese company, Matsushita, has to sell Can$ 50 m sometime during the next 6 months, and would lock in a minimum value. The price of a put option with a strike price of K =¥230/$ is 4/$ What is the actual amount that they receive if the spot rate at the end of 3 months is ¥ 245/$?Since ST >K, the optic worthless and Matsushita can do better by selling at the market rate of V 245/$, rather than the exercise price of Thus, their total receipts will be CV234/$ CV230/$ C¥241/$ VAIS
Suppose a Japanese company, Matsushita, has to sell Can$ 50 m sometime during the next 6 months, and would lock in a minimum value. The price of a put option with a strike price of K =¥230/$ is 4/$ What is the actual amount that they receive if the spot rate at the end of 3 months is ¥ 245/$?Since ST >K, the optic worthless and Matsushita can do better by selling at the market rate of V 245/$, rather than the exercise price of Thus, their total receipts will be CV234/$ CV230/$ C¥241/$ VAIS
Chapter5: Currency Derivatives
Section: Chapter Questions
Problem 4ST
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Question
![Suppose a Japanese company, Matsushita, has to sell Can$ 50 m sometime during the next 6 months, and would like to
lock in a minimum ¥ value. The price of a put option with a strike price of K = ¥ 230/$ is ¥ 4/$
What is the actual amount that they receive if the spot rate at the end of 3 months is 245/$?Since ST >K, the options are
worthless and Matsushita can do better by selling at the market rate of ¥ 245/$, rather than the exercise price of ¥ 230/$.
Thus, their total receipts will be
CV234/$
C¥230 / $
C¥241/$
C¥4/$](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5582177c-104b-438a-953b-9c7a3cd96e2c%2F0a6f816c-28a4-4bf4-a2f4-703535da46e9%2Fijamdp_processed.png&w=3840&q=75)
Transcribed Image Text:Suppose a Japanese company, Matsushita, has to sell Can$ 50 m sometime during the next 6 months, and would like to
lock in a minimum ¥ value. The price of a put option with a strike price of K = ¥ 230/$ is ¥ 4/$
What is the actual amount that they receive if the spot rate at the end of 3 months is 245/$?Since ST >K, the options are
worthless and Matsushita can do better by selling at the market rate of ¥ 245/$, rather than the exercise price of ¥ 230/$.
Thus, their total receipts will be
CV234/$
C¥230 / $
C¥241/$
C¥4/$
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