9. A US-based company just made a sale to a European customer for which you will receive 5,000,000 in 2 years. The current spot rate is $1.25/. The annual interest rate is 1.0% in the U.S. and 2.0% in Europe. a) (5 points) Using a forward market hedge, (i) indicate whether you should use a long or short forward contract to hedge currency risk, (i) calculate the no-arbitrage forward price at which you could enter into a forward contract that expires in 2 years (iii) find the value of the account receivable (in dollars) using the forward market hedge (use the price calculated in part (ii)). b) (5 points) Do a money market hedge. c) (7 points) If you believe the exchange rate in 2 years will be either $1.15/ or $1.30/, construct a Delta hedge with strike price at $1.20/ if the options contract size is 500,000. The call premium is $0.03/and the put premium is $0.04/. (i) Indicate whether you should buy a call or put option contract to hedge currency risk (i) Find the hedge ratio (iii) Specify how many contracts you need to buy (iv) Find the final cash flow of account receivable (in dollars) using the delta hedge