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Find what the probability that the forward hedge will result

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Assume that Alpha Co. will receive CD750,000 in 90 days. Today's spot rate of the Canadian Dollar is $.62, and the 90-day forward rate is $.635. Alpha has developed the following probability distribution for the spot rate in 90 days:

Possible Spot Rate in 90 Days   Probability
$.61 10%
$.63 20%
$.64 40%
$.65 30%

Problem 1: The probability that the forward hedge will result in more dollars received than not hedging is:

Option 1: 10 percent.
Option 2: 20 percent.
Option 3: 30 percent.
Option 4: 50 percent.
Option 5: 70 percent.

Reference no: EM132756034

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