On March 1, Bechtel Submits a Franc?denominated Bid on a Project

question 39

Multiple Choice

On March 1, Bechtel submits a franc?denominated bid on a project in France. Bechtel will not learn until June 1 whether it has won the contract. What is the most appropriate way for Bechtel to manage the exchange risk on this contract?

• A) sell the franc amount of the bid forward for U.S. dollars
• B) buy French francs forward in the amount of the contract
• C) buy a put option on francs in the amount of the franc exposure
• D) sell a call option on francs in the amount of franc exposure

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