ABC Corporation, Located in Canada, Has an Accounts Receivable of SF

ABC Corporation, located in Canada, has an accounts receivable of SF 1 million to be received in one year. The current spot rate is $0.80/SF and the six-month forward rate is $0.82/SF. The one year interest rates are 4.5 percent and 2 percent in Canada and Switzerland respectively. A one-year call option on Swiss franc at the strike price of $0.81 per Swiss franc for a premium of 0.2 cent per Swiss franc is available.
-The future dollar amount of this receivable using the money market hedge is:

A) $780,861.2
B) $784,313.7
C) $819,607.8
D) $1,220,096

Correct Answer:

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