Foster Autos is a U.S. multinational that just purchased £1,300,000 of goods on account, due in 30 days from a British supplier. The spot exchange rate is $1.715/£. Foster wants to hedge the account payable with an OTC call option with a strike price of $1.750/£. The option premium is 0.60 percent, and the 30-day periodic rate in the U.S. is 0.30 percent. If the spot exchange rate in 30 days is $1.696/£, what is the total cost of the account payable (including the cost of the option)?

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The Answer of Foster Autos is a U.S. multinational that just purchased £1,300,000 of goods on account, due in 30 days from a British supplier. The spot exchange rate is $1.715/£. Foster wants to hedge the account payable with an OTC call option with a strike price of $1.750/£. The option premium is 0.60 percent, and the 30-day periodic rate in the U.S. is 0.30 percent. If the spot exchange rate in 30 days is $1.696/£, what is the total cost of the account payable (including the cost of the option)?

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