Mender Co Will Be Receiving 500,000 Australian Dollars in 180 Days

Mender Co. will be receiving 500,000 Australian dollars in 180 days. Currently, a 180-day call option with an exercise price of $.68 and a premium of $.02 is available. Also, a 180-day put option with an exercise price of $.66 and a premium of $.02 is available. Mender plans to purchase options to hedge its receivables position. Assuming that the spot rate in 180 days is $.67, what is the amount received from the currency option hedge (after considering the premium paid) ?

A) $330,000
B) $325,000
C) $320,000
D) $340,000

Correct Answer:

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