A US based importer has a 1,000,000 payable due in one year. The spot exchange rate is $1.85 = 1.00 and the one-year forward rate is $1.90 = 1.00. Call Options on the British Pound with an exercise price of $1.90 are selling for $0.02 per , and put options on the British Pound with an exercise price of $1.90 are selling for $0.03 per . The one-year risk free rates are i$ = 4.00%; and i = 5%.

a. Briefly explain a hedging strategy using forward contract

b. Briefly explain a strategy using money market hedging

c. Briefly explain a hedging strategy using options