An Australian company imports goods from Germany and expects the payment of EUR 250,000 after 60 days. Therefore, the company purchased a Call option with a strike price of AUD 1.25/EUR and a premium of 5% of the option value. At the maturity of the option, the market price is AUD/EUR=0.85. Specify the decision of the Australian company. O a. To not hedge the risk O b. To purchase the amount in EUR from the market O c To exercise the option O d. To search for another option contract

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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An Australian company imports goods from Germany and expects the payment of EUR 250,000 after 60 days. Therefore, the company purchased a
Call option with a strike price of AUD 1.25/EUR and a premium of 5% of the option value. At the maturity of the option, the market price is
AUD/EUR=0.85. Specify the decision of the Australian company.
O a. To not hedge the risk
O b. To purchase the amount in EUR from the market
O c To exercise the option
O d. To search for another option contract
Transcribed Image Text:An Australian company imports goods from Germany and expects the payment of EUR 250,000 after 60 days. Therefore, the company purchased a Call option with a strike price of AUD 1.25/EUR and a premium of 5% of the option value. At the maturity of the option, the market price is AUD/EUR=0.85. Specify the decision of the Australian company. O a. To not hedge the risk O b. To purchase the amount in EUR from the market O c To exercise the option O d. To search for another option contract
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