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Call Options Hedge of Foreign Currency Debt Taking advantage of lower interest rates in the...

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Call Options Hedge of Foreign Currency Debt Taking advantage of lower interest rates in the United Kingdom, Cariton Inc, a US. firm, borrowed E2.000,000 on July 1, 2023, to be repaid in one year. When the transaction occurred, the exchange rate was st.30y. To hedge against possible appreciation of the Entish pound, Cariton paid a premium of 10.0141. for call options on 2.000000 expiring june 30, 2024. With a strike price of 31.29/L. On December 31, 2023, when Carhonis books are closed, the exchange rate is 31.35/L and the calls are selling for 50.069VI, On fune 30,2024 , Carlton sells the cals for 10,12/f. The exchange rate at that time is 51,41/L. Reouired Prepare Cariton's journal entries made on July 1, 2023, December 31, 2023, and june 30, 2024, to recognite the cahis walue changes and the exchange rate adiustments on the debt. Innore interest on and repayment of the debt Prepare Cariton' journal entries made on/uly 1.2023, Decermber 31, 2023, and june 30, 2024, to recognize the catis value changes and the michange rate adjustments on the debt. ignore interest on and rebavment of the deht

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