In: Finance
Please show how answer is derived. Assume that Kolman Co. will receive NZ900,000 in 60 days. The spot rate of the New Zealand dollar is $.69, and the 60-day forward rate is $.715. Kolman has developed the following probability distribution for the spot rate in 90 days: | |||
Possible Spot Rate | | ||
in 90 Days | Probability | ||
$0.69 | 10% | ||
$0.70 | 20% | ||
$0.71 | 40% | ||
$0.75 | 30% | ||
| |||
What is the probability that the forward hedge will result in more dollars received than not hedging is: |