CIMA Exam CIMAPRA19-P03-1 Topic 3 Question 38 Discussion

Actual exam question for CIMA's CIMAPRA19-P03-1 exam

Question #: 38
Topic #: 3

A UK manufacturing company has simultaneously:

* purchased a put option to sell USD 1million at an exercise price of GBP1.00 = USD1.65

* sold a call option that grants the option holder the right to buy USD 1million at a price of GBP1.00 = USD1.61(this option has the same maturity date as the put).

Which of the following is a valid explanation for entering into these option positions?

AThe company expects to receive USD 1million from a customer and wishes to offset the cost of the put option by the premium on the call option.

BThe company expects to pay USD 1million to a supplier and wishes to offset the premium from the call option against the cost of the put option.

CThe company expects to receive USD 1million from a customer and wishes to obtain an additional benefit if the USD strengthens beyond GBP 1.00 = USD 1.61.

DThe company expects to pay USD 1million to a supplier and wishes to obtain additional protection against the USD strengthening beyond GBP 1.00 = USD 1.65.

Show Suggested Answer

Suggested Answer: B, C, E

by Yoko at Jan 22, 2024, 07:11 PM

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India

2 days ago

I think the answer is C.

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