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Options hedging help

Discuss Options hedging help within the Financial Management ( FM ) forums, part of the Resolve Your Query - Get Help and discuss Projects category; Hi there, I need some help on this question as I'm not too sure how the approach should be like. ...

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kassac
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kassac
 
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Join Date: Jun 2009
Options hedging help - November 3rd, 2009

Hi there,

I need some help on this question as I'm not too sure how the approach should be like. Please help!!!! The question is stated below.


ABC Co. is a Scottish importer whose main supplier is in India. The firm has contracted to pay the supplier INR15 million in 4 months' time. The spot exchange rate is 65 rupees per 1 pound.

Use options to hedge at an exercise price of 1 pound = 73 rupees at the premium cost of 0.10 pound per 100 rupees.


I would appreciate any help on how to solve this question!!!
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