What is the probability that the put option will be exercise

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Reference no: EM131910191

You are the treasurer of Arizona Corporation and must decide how to hedge (if at all) future receivables of 350,000 Australian dollars (A$) 180 days from now. Put options are available for a premium of $.02 per unit and an exercise price of $.50 per Australian dollar. The forecasted spot rate of the Australian dollar in 180 days is:

Future Spot Rate	Probability
$.46	10%
$.48	35%
$.52	55%

What is the probability that the put option will be exercised (assuming Arizona purchased it)?

	a.	10%.
	b.	35%.
	c.	55%.
	d.	45%.

Reference no: EM131910191

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