Expected value of the real cost of hedging payables

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Celine Co. will need 500,000 in 90 days to pay for German imports. Today's 90-day forward rate of the euro is $1.07. There is a 40 percent chance that the spot rate of the euro in 90 days will be $1.02, and a 60 percent chance that the spot rate of the euro in 90 days will be $1.09. Based on this information, the expected value of the real cost of hedging payables is $____.

a. 35,000

b. 25,000

c. -1,000

d 1,000

Reference no: EM13766387

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