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CA Final · Advanced Financial Management · Foreign Exchange Exposure and Risk Management

Ananya Exports expects to receive USD 200,000 in three months and buys a USD put option (strike Rs 83.00 per USD) for a premium of Rs 0.60 per USD. At expiry the spot rate is Rs 81.50. Ignoring interest on the premium, what is the net rupee realisation?

The put is exercised because spot Rs 81.50 is below the strike Rs 83.00. Net realisation per dollar is 83.00 minus the premium 0.60, which is Rs 82.40. On USD 200,000 this gives Rs 16,480,000.

  1. ARs 16,480,000Correct
  2. BRs 16,300,000
  3. CRs 16,420,000
  4. DRs 16,600,000

Explanation

Spot (81.50) is below strike (83.00), so the put is exercised. Realisation per USD = 83.00 - 0.60 = 82.40. Total = 200,000 x 82.40 = Rs 16,480,000. Rs 16,300,000 is wrong because it sells at spot (81.50) and ignores the option. Rs 16,420,000 wrongly subtracts premium from spot-based value in a different way; Rs 16,600,000 ignores the premium.

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