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What is the expected value of the cash to be paid

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Question - 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 INR1.13 million with an exercise price of A$0.3749 and a premium of A$0.0303.

-A$0.2428 [33 per cent probability]

-A$0.4583 [40 per cent probability]

-A$0.5613 [(100-33-40) per cent probability]

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

Reference no: EM133060283

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