A U.S. firm holds an asset in Great Britain and faces the following scenario:

	State 1				State 2				State 3
Probability	25%				50%				25%
Spot rate	$	2.20	/		$	2.00	/		$	1.80	/
P*		3,000				2,500				2,000
P	$	6,600			$	5,000			$	3,600

where,

P* = Pound sterling price of the asset held by the U.S. firm

P = Dollar price of the same asset

Which of the following would be an effective hedge?

A) Buy 2,500 forward at the 1-year forward rate, F1($/), that prevails at time zero.

B) Sell 7,500 forward at the 1-year forward rate, F1($/), that prevails at time zero.

C) Sell 25,000 forward at the 1-year forward rate, F1($/), that prevails at time zero.

D) none of the options