1. Med-device, a medical device company located in Ireland, has exported a large shipment of medical devices to a U.S company and has billed them $200m to be paid in one year. Med-devices Chief Financial Officer is faced with the decision of how to protect against a depreciation in the dollar against the euro. The US interest rate is 2%. The EU interest rate is 0.1%. The current spot rate is 0.898/$ and the one-year forward rate is 0.88/$. A one-year call option on the dollar with an at the money strike price has a premium of 0.02 per dollar while a put option at the same strike price is 0.01 per dollar. a. Advice the CEO of what the proceeds will be in Euro if he/she enters into a forward market hedge, money market hedge or options hedge. [15 Marks] b. Compare the three risk management alternatives and recommend how Med-device should deal with the foreign exchange rate exposure. [5 Marks] c. Outline some of the strategies available to international firms who want to reduce long term foreign exchange exposure. [13 Marks]