Assume that Kramer Co. will receive SF800,000 in 90 days. Today's spot rate of the Swiss franc is $.62, and the 90-day forward rate is $.635. Kramer has developed the following probability distribution for the spot rate in 90 days: Possible Spot Rate in 90 Days Probability $.61 10% $.63 30% $.64 40% $.65 20% The probability that the forward hedge will result in more dollars received than not hedging is: a. 20 percent. b. 40 percent. c. 60 percent. d. 30 percent. e. 10 percent.

Assume that Kramer Co. will receive SF800,000 in 90 days. Today's spot rate of the Swiss franc is $.62, and the 90-day forward rate is $.635. Kramer has developed the following probability distribution for the spot rate in 90 days: Possible Spot Rate in 90 Days Probability $.61 10% $.63 30% $.64 40% $.65 20% The probability that the forward hedge will result in more dollars received than not hedging is: a. 20 percent. b. 40 percent. c. 60 percent. d. 30 percent. e. 10 percent.

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter10: Measuring Exposure To Exchange Rate Fluctuations

Section: Chapter Questions

Problem 33QA

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