A U.S. firm has bought from an Italian firm 1,000,000 worth of products, payment to be made in six months when goods are received in U.S. To hedge against an increase in euro, the U.S. firm buys an option on the euro with a strike price of $1.35 per euro and pays an option premium of $0.01 per euro. If at maturity the rate is $1.30 per euro:

a.the firm will incur a cost of $1,350,000 on the purchase net of the cost of hedging.

b.the firm will incur a cost of $1,310,000 on the purchase net of the cost of hedging

c.the firm will incur a cost of $1,340,000 on the purchase net of the cost of hedging.

d.none of the given choices