How many dollars will kramer receive

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Assume that Kramer Co. will receive SF100,000 in 30 days. Today's spot rate of the Swiss franc is $.64, and the 90-day forward rate is $.645. Kramer has developed the following probability distribution for the spot rate in 30 days. The possible spot rate is $0.62, $0.63. $0.64 and $0.65 with the probability 30%, 10%, 40, and 20%.

Problem a. How many dollars will Kramer receive if it uses the forward hedge?

Problem b. How many dollars will Kramer expected if it does not hedge?

Problem c. In the previous question of Kramer Co., Kramer will not hedge its receivable with the forward contract. (True or False)?

Reference no: EM132885197

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