3. Exchange traded foreign currency option prices in London for dollar/sterling contracts are shown below: Sterling (f12,500) contracts Calls Puts Exercise Price September December September December 1.90 5.55 7.95 0.42 1.95 1.95 2.75 3.85 4.15 3.80 2.00 0.25 1.00 9.40 2.05 0.20 Option price are in cents per f. The currency spot exchange rate is $1.9405-$1.9425/f. Required Assume that you work for a US company that has exported goods to the UK and is due to receive a payment of f1,625,000 in three months' time. It is now the end of June. Calculate and explain whether your company should hedge its sterling exposure on the foreign currency option market if the company's treasury believes the spot rate in 3month's time will be: $1.8950-$1.8970/f $2.0240-$2.0260/f