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Suppose your firm will export to Peru (currency Peruvian New Sol [PEN]) and will receive PEN...

Suppose your firm will export to Peru (currency Peruvian New Sol [PEN]) and will receive PEN 750,000 in 90 days. Put options with a strike price of USD .300 are available for a premium of USD .025 per unit. Your firm decides to hedge its exposure by purchasing Put options. Suppose in 90 days the spot rate is USD .315 / PEN. Your net cash inflow from this transaction is:

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Expert Solution

Your net cash inflow from this transaction is
=750000*0.315+(MAX(0.300-0.315,0)-0.025)*750000
=217500.0000 USD

jeff jeffy answered 2 years ago
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