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What is the expected value of the cash

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Reference no: EM132711458

ABC has developed the following probability distribution for the spot rate of the Indian rupee (INR) against the Australian dollar (A$) in six months to buy call options on INR1.61 million with an exercise price of A$0.3754 and a premium of A$0.0334.

  • A$0.2741 [40 per cent probability]
  • A$0.4250 [24 per cent probability]
  • A$0.5860 [(100-40-24) per cent probability]

 

What is the expected value of the cash to be paid in A$ for the call option hedge?

Reference no: EM132711458

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