Assume that Jones Co.will need to purchase 100,000 Singapore dollars (S$)in 180 days. Today's spot rate of the S$ is $.50,and the 180day forward rate is $.53. A call option on S$ exists,with an exercise price of $.52,a premium of $.02,and a 180day expiration date. A put option on S$ exists,with an exercise price of $.51,a premium of $.02,and a 180day expiration date. Jones has developed the following probability distribution for the spot rate in 180 days:

The probability that the forward hedge will result in a higher payment than the options hedge is _______ (include the amount paid for the premium when estimating the U.S.dollars required for the options hedge).

Question

Assume that Jones Co.will need to purchase 100,000 Singapore dollars (S$) in 180 days. Today's spot rate of the S$ is $.50,and the 180day forward rate is $.53. A call option on S$ exists,with an exercise price of $.52,a premium of $.02,and a 180day expiration date. A put option on S$ exists,with an exercise price of $.51,a premium of $.02,and a 180day expiration date. Jones has developed the following probability distribution for the spot rate in 180 days:

The probability that the forward hedge will result in a higher payment than the options hedge is _______ (include the amount paid for the premium when estimating the U.S.dollars required for the options hedge) .

The probability that the forward hedge will result in a higher payment than the options hedge is _______ (include the amount paid for the premium when estimating the U.S.dollars required for the options hedge).

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The Answer of Assume that Jones Co.will need to purchase 100,000 Singapore dollars (S$)in 180 days.  Today's spot rate of the S$ is $.50,and the 180day forward rate is $.53.  A call option on S$ exists,with an exercise price of $.52,a premium of $.02,and a 180day expiration date.  A put option on S$ exists,with an exercise price of $.51,a premium of $.02,and a 180day expiration date.  Jones has developed the following probability distribution for the spot rate in 180 days:

The probability that the forward hedge will result in a higher payment than the options hedge is _______ (include the amount paid for the premium when estimating the U.S.dollars required for the options hedge).

Assume That Jones Co