Currency Futures. Use the following information to determine the probability dis

Question

Currency Futures.  Use the following information to determine the probability distribution of per unit gains from selling Mexican peso futures.

Spot rate of peso is $.10

Price of peso futures is $0.102 per unit

Your expectation of the peso spot rate at maturity of the futures contract is:

Possible Outcome for Future Spot Rate                       Probability

$0.090                                                                                10%

0.095                                                                                   70

0.110                                                                                   20

Explanation / Answer

expected future spot rate of peso at maturity

0.09*0.1+0.095*0.7+0.11*0.2=0.0975 dollars

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