Suppose That the Exchange Rate Is €1

question 73

Multiple Choice

Suppose that the exchange rate is €1.25 = £1.00.Options (calls and puts) are available on the Philadelphia exchange in units of €10,000 with strike prices of $1.60/€1.00.Options (calls and puts) are available on the Philadelphia exchange in units of £10,000 with strike prices of $2.00/£1.00.For a U.S.firm to hedge a €100,000 receivable,

• A)buy 10 call options on the euro with a strike in dollars.
• B)buy 10 put options on the pound with a strike in dollars.
• C)sell 10 call options on the euro with a strike in dollars.
• D)sell 8 put options on the pound with a strike in dollars.

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