a) A US based firm will be paid Euros 3,000,000 in 90 days from now for todays shipment to Germany. It wishes to hedge this receivable. Assume the following information:

90-day eurodollar borrowing rate	6.00%
US companys weighted average cost of capital ($)	8.00%
90-day forward rate 1USD = 0.934 EUROs	$0.934
Current spot rate 1USD = 0.925 EUROs	$0.925

aWould the firm be better off with a forward hedge or a money market hedge? Show workings for each.

b) b) Harrison Brothers Ltd, a firm based in the US, transported goods to Australia and will receive 2 million Australian dollars in 3 months. It believes the 3-month forward rate will be an accurate forecast of the future spot rate. The 3-month forward rate of the Australian dollar is $0.78. A put option contract for 2 million Australian dollars is available with an exercise price of $0.82 and a premium of $0.03. Would Harrison Brothers prefer a put options hedge to no hedge? If a put option hedge is recommended, compare the outcome with the no hedge strategy using any relevant calculations. If no put hedge is recommended, provide an explanation as to why this is so and show, with calculations, what the no hedge outcome is likely to be.