Compute the proceeds from the forward contract

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Reference no: EM132035340

Problem

A U.S. firm has a subsidiary in Great Britain and faces the following scenario:

	Probability	Spot Rate	C^*	C	Proceeds from Fwd. contract	Dollar value of hedged position
State 1	40%	$2.50/£	£2,000
State 2	60%	$2.30/£	£2,500

Compute the proceeds from the forward contract if you hedge this exposure.

Assume the forward rate is $2.45/£. Fill in the proceeds in the appropriate box in the table above. Use two decimal places in your calculations.

Reference no: EM132035340

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