(Answered) Question - a firm wants to use an option to hedge 125

Accounting

Question - A firm wants to use an option to hedge 12.5 million New Zealand dollars in receivables from New Zealand firms. The option premium is US$0.03/NZ$. The exercise price is US$0.55/NZ$. If the option is exercised, what is the total amount of US dollars received (after accounting for the premium paid) by the firm?

a. $6,875,000

b. $7,250,000

c. $7,000,000

d. $6,500,000

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