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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 $0.02 per unit and an exercise price of $0.50 per Australian dollar. The forecasted spot rate of the Australian dollar in 180 days is:

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The 180-day forward rate of the Australian dollar is $0.50.

What is the probability that the forward hedge will result in more dollars received than the options hedge?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92849522

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