Question

Suppose your company has an option that gives them the right to sell $1 for 5 Reals in 3 months, what would you recommend your company do with the option?
A- Do not use the option but sell coffee in Brazil
B- Throw the option aways as it is not useful
C- Do not use the option but buy coffee in Brazil
D- Use the option and buy coffee in Brazil
E- Use the option and sell coffee in Brazil

Answer 1

Answer:

E- Use the option and sell coffee in Brazil

Explanation:

Real is the currency of the country Brazil.

In the context, it is said that, the exchange rate of the one dollar is five Brazilian reals in three months. Therefore I would recommend the company to sell the coffee in Brazil because they have a higher rate of exchange and this will help to earn more profit.

Therefore, I would recommend to use the option and would sell coffee in Brazil.