FAB Corp Will Need 200,000 Canadian Dollars (C$) in 90 Days

FAB Corp. will need 200,000 Canadian dollars (C$) in 90 days to cover a payables position. Currently, a 90-day call option with an exercise price of $.75 and a premium of $.01 is available. Also, a 90-day put option with an exercise price of $.73 and a premium of $.01 is available. FAB plans to purchase options to hedge its payables position. Assuming that the spot rate in 90 days is $.71, what is the net amount paid, assuming FAB wishes to minimize its cost?​

A) ​$144,000
B) ​$148,000
C) ​$152,000
D) ​$150,000

Correct Answer:

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