Space-X Corporation, located in the United States, has an accounts payable obligation of $750 million payable in one year to Mitsubishi Electric of Japan. The current spot rate is #116/S and the one year forward rate currently is 4115/S. However, it is expected that the actual spot rate one year from now could be #118/$. The annual interest rate is 3 percent in Japan and 6 percent in the United States. One-year Call Options on (one Option round-lot ¥1,000,000) with a Strike/Exercise Price of $0.00864 are currently trading at the Philadelphia Stock Exchange (PHLX) for a premium of 0.012 cents Total premium that needs to be paid is: A. $180,000.00 OB. $108,433.20 C.$110,523.80 OD.$642,856.80 Space-X Corporation, located in the United States, has an accounts payable obligation of $750 million payable in one year to Mitsubishi Electric of Japan. The current spot rate is ¥116/$ and the one year forward rate currently is ¥115/S. However, it is expected that the actual spot rate one year from now could be ¥118/S. The annual interest rate is 3 percent in Japan and 6 percent in the United States. One-year Call Options on ¥ (one Option round-lot ¥1,000,000) with a Strike/Exercise Price of $0.0086 are currently trading at the Philadelphia Stock Exchange (PHLX) for a premium of 0.012 cents How many Option round-lots are required for a perfect hedge? OA 1400 OB. 1500 OC. 903.50 OD.910
Space-X Corporation, located in the United States, has an accounts payable obligation of $750 million payable in one year to Mitsubishi Electric of Japan. The current spot rate is #116/S and the one year forward rate currently is 4115/S. However, it is expected that the actual spot rate one year from now could be #118/$. The annual interest rate is 3 percent in Japan and 6 percent in the United States. One-year Call Options on (one Option round-lot ¥1,000,000) with a Strike/Exercise Price of $0.00864 are currently trading at the Philadelphia Stock Exchange (PHLX) for a premium of 0.012 cents Total premium that needs to be paid is: A. $180,000.00 OB. $108,433.20 C.$110,523.80 OD.$642,856.80 Space-X Corporation, located in the United States, has an accounts payable obligation of $750 million payable in one year to Mitsubishi Electric of Japan. The current spot rate is ¥116/$ and the one year forward rate currently is ¥115/S. However, it is expected that the actual spot rate one year from now could be ¥118/S. The annual interest rate is 3 percent in Japan and 6 percent in the United States. One-year Call Options on ¥ (one Option round-lot ¥1,000,000) with a Strike/Exercise Price of $0.0086 are currently trading at the Philadelphia Stock Exchange (PHLX) for a premium of 0.012 cents How many Option round-lots are required for a perfect hedge? OA 1400 OB. 1500 OC. 903.50 OD.910
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Space-X Corporation, located in the United States, has an accounts payable obligation of $750 million payable in one year to Mitsubishi Electric of
Japan. The current spot rate is #116/S and the one year forward rate currently is 4115/S. However, it is expected that the actual spot rate one year
from now could be #118/$. The annual interest rate is 3 percent in Japan and 6 percent in the United States. One-year Call Options on (one Option
round-lot ¥1,000,000) with a Strike/Exercise Price of $0.00864 are currently trading at the Philadelphia Stock Exchange (PHLX) for a premium of
0.012 cents
Total premium that needs to be paid is:
A. $180,000.00
OB. $108,433.20
C.$110,523.80
OD.$642,856.80
Transcribed Image Text:Space-X Corporation, located in the United States, has an accounts payable obligation of $750 million payable in one year to Mitsubishi Electric of
Japan. The current spot rate is ¥116/$ and the one year forward rate currently is ¥115/S. However, it is expected that the actual spot rate one year
from now could be ¥118/S. The annual interest rate is 3 percent in Japan and 6 percent in the United States. One-year Call Options on ¥ (one Option
round-lot ¥1,000,000) with a Strike/Exercise Price of $0.0086 are currently trading at the Philadelphia Stock Exchange (PHLX) for a premium of
0.012 cents
How many Option round-lots are required for a perfect hedge?
OA 1400
OB. 1500
OC. 903.50
OD.910
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education