On December 1, 2018, 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, 2019. Keenan purchased a foreign currency put option with a strike price of $.97 (U. S.) on December 1, 2018. This foreign currency option is designated as a cash flow 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, 2019. 27) A) $7,500. B) $6,000. C) $3,000. D) $1,500. E) $4,500.

Compute the U. S. dollars received on February 1, 2019. 28) A) $141,000

B) $142,500. C) $136,500. D) $138,000. E) $145,500.