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What are the estimated dollar cash outflows

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Question - You are the treasurer of Montana Corp. and must decide how to hedge (if at all) future payables of 2 million Japanese yen 60 days from now. Call options are available with a premium of $.0002 per unit and an exercise price of $.01054 per Japanese yen. The forecasted spot rate of the Japanese yen in 60 days is $0.01051 with a probability of 20%, $0.01053 with a probability of 30%, $0.01055 with a probability of 25%, and $0.01056 with a probability of 25%. What are the estimated dollar cash outflows of currency call hedge?

Reference no: EM132968590

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