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What is the expected value of the cash to be paid

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Wesfarmers 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 INR1.23 million with an exercise price of A$0.3322 and a premium of A$0.0338.

A$0.2524 [31 per cent probability]
A$0.4891 [25 per cent probability]
A$0.5972 [(100-31-25) per cent probability]

Problem 1: What is the expected value of the cash to be paid in A$ for the call option hedge?

Reference no: EM132942755

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