On december 1, 2013, keenan company, a u. s. firm, sold merchandise to velez company of canada for 150,000 canadian dollars (cad). collection of the receivable is due on february 1, 2014. keenan purchased a foreign currency put option with a strike price of $.97 (u. s.) on december 1, 2013. this foreign currency option is designated as a fair value hedge. relevant exchange rates follow:
date spot rate option premium
december 1, 2018 $0.97 $0.05
december 31, 2018 $0.95 $0.04
february 1, 2019 $0.94 $0.03
compute the fair value of the foreign currency option at february 1, 2014.
(a) $7,500.
(b) $6,000.
(c) $3,000.
(d) $1,500.
(e) $4,500.
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