Assume that Patton Co. will receive 100,000 New Zealand dollars (NZ$) in 180 days. Today's spot rate of the NZ$ is $.50, and the 180-day forward rate is $.51. A call option on NZ$ exists, with an exercise price of $.52, a premium of $.02, and a 180-day expiration date. A put option on NZ$ exists with an exercise price of $.51, a premium of $.02, and a 180-day expiration date. Patton Co. has developed the following probability distribution for the spot rate in 180 days: The probability that the forward hedge will result in more U.S. dollars received than the options hedge is ____ (deduct the amount paid for the premium when estimating the U.S. dollars received on the options hedge).

Question

Assume that Patton Co. will receive 100,000 New Zealand dollars (NZ$) in 180 days. Today's spot rate of the NZ$ is $.50, and the 180-day forward rate is $.51. A call option on NZ$ exists, with an exercise price of $.52, a premium of $.02, and a 180-day expiration date. A put option on NZ$ exists with an exercise price of $.51, a premium of $.02, and a 180-day expiration date. Patton Co. has developed the following probability distribution for the spot rate in 180 days:  The probability that the forward hedge will result in more U.S. dollars received than the options hedge is ____ (deduct the amount paid for the premium when estimating the U.S. dollars received on the options hedge).

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The Answer of Assume that Patton Co. will receive 100,000 New Zealand dollars (NZ$) in 180 days. Today's spot rate of the NZ$ is $.50, and the 180-day forward rate is $.51. A call option on NZ$ exists, with an exercise price of $.52, a premium of $.02, and a 180-day expiration date. A put option on NZ$ exists with an exercise price of $.51, a premium of $.02, and a 180-day expiration date. Patton Co. has developed the following probability distribution for the spot rate in 180 days:  The probability that the forward hedge will result in more U.S. dollars received than the options hedge is ____ (deduct the amount paid for the premium when estimating the U.S. dollars received on the options hedge).

Assume That Patton Co