Question

1. Malibu, Inc., is a U.S. company that export goods to British. It plans to use put options to hedge receivables of 100,000 pounds in 90 days. Three put options are available that have an expiration date 90 days from now. Fill in the number of dollars needed to receive for the receivables (including the option premium paid) for each option available under each possible scenario

   Scenario	Spot rate of pound in 90 days	Probability	Option A Exercise price= $1.62 Premium = $0.03	Option B Exercise price= $1.73 Premium = $0.04	Option C Exercise price= $1.77 Premium = $0.05
   1	$1.50	5%
   2	$1.55	5%
   3	$1.60	5%
   4	$1.75	10%
   5	$1.80	75%

   Based on the probability given in the table, which option will you choose? (A, B, C)

Answer 1