4 Summarise the results of Australian dollars received based on an unhedged strategy, a put option strategy and a forward hedge strategy. Select the strategy that you prefer based on the information provided.

Jim Logan, owner of the Sports Exports Company, will be receiving 2,000,000 Japanese yen one month from now as payment for exports produced and sent by his company. Logan is concerned about his exposure because he believes that there are two possible scenarios:

(1) the yen will depreciate by 10 per cent over the next month, or (2) the yen will appreciate by 5 per cent over the next month. There is a 70 per cent chance that (1) will occur. There is a 30 per cent chance that

(2) will occur. Logan notices that the prevailing spot rate of the pound is A$0.0125, and the one-month forward rate is A$0.0115.