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What is the expected value of the cash to be paid in a

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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 INR1.50 million with an exercise price of A$0.3169 and a premium of A$0.0383.

  1. A$0.2406 [39 per cent probability]
  2. A$0.4580 [31 per cent probability]
  3. A$0.5743 [(100-39-31) 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: EM132771849

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