On June 18, Burger Corporation entered into a firm commitment to purchase specialized equipment from the Hyabuza Trading Company for ¥80,000,000 on August 20 . The exchange rate on June 1 . is ¥100 = $1 . To reduce the exchange rate risk that could increase the cost of the equipment in U.S. dollars, Burger pays $12,000 for a call option contract. This contract gives Burger the option to
purchase ¥80,000,000 at an exchange rate of ¥100 = $1 on August 20 . On August 20, the exchange rate is ¥93 = $1 . How much did Burger save by purchasing the call option (answers rounded to the nearest dollar)?
a. $12,000
b. $48,215
c. $60,215
d. Burger would have been better off not to have purchased the call option.
B
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