On March 1, Chow Corporation entered into a firm commitment to purchase specialized equipment from the Gifu Trading Company for ¥80,000,000 on June 1. The exchange rate on March 1 is ¥100 = $1. To reduce the exchange rate risk that could increase the cost of the equipment in U.S. dollars, Chow pays $20,000 for a call option contract. This contract gives Chow the option to purchase ¥80,000,000 at an exchange rate of ¥100 = $1 on June 1. On June 1, the exchange rate is ¥105 = $1. How much did Chow save by purchasing the call option (answers rounded to the nearest dollar)?,A) $20,000,B) $27,619,C) $47,619,D) Chow would have been better off not to have purchased the call option.
Regent Papers is a library of common essays on high school, college, undergraduate and postgraduate topics. We have collected top papers from various institution, students and professors. The papers are based on common essay topics in all subjects.