Draw contingency diagram and mark the breakeven point

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Reference no: EM132061113

An importer want to use call option to hedge its pound payables £31,250 for $.02 per pound. The strike price was $1.44 and the spot rate at the time the option was exercised was $1.47. There are £31,250 in a British pound option. What is the net US$ amount the importer paid for this option? Please draw a contingency diagram and mark the breakeven point.

Step by step explanation please, and how to draw a contingency diagram.

Reference no: EM132061113

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