1. 2. 3. STEP: 1 of 3 Suppose that Mullen Co, a U.S. based MNC, knows that it will need 100,000 pounds in one year in order to purchase supplies. It is considering a forward call option to hedge these payables. Currency call options on the pound with expiration dates in one year currently have an exercise price of $1.21 and a premium of $0.03. Mullen Co. wishes to use its own forecast of what the spot rate might be for the pound one year from now. The company believes there are three possible outcomes for the spot rate for the pound in one year. These three scenarios are shown in the following table: Pound Spot Rate in 1 Year Total Price Per Unit, with Premium Option Premium $0.03 Scenario Exercise Options? Probability Total Price Paid for 100,000 Pounds $119,000 1 20.00% $1.16 no $1.19 2 70.00% $1.22 $0.03 $1.24 $124,000 yes 3 $1.24 10.00% $0.03 $1.24 $124,000 yes 4 Given the information in the table, the expected value of dollar cash outflows when hedging payables with currency call options is for all 100,000 pounds. Grade Step (10 complete this step and unlock the next step) TOTAL SCORE: 013