An importer, Sarah, needs to protect her one year account payable of 61, 000 by a call option for $.01 per pound premium to avoid pound appreciation against USD.

X= $1.50 per Option size 31,250 units S₀ =$1.52 per Exercised at S_t= $1.54/

How many option contracts does she need? will she over hedged or under hedged?

		1 contracts and over hedged
		2 contracts and under hedged
		Neither over hedged nor under hedged
		2 contracts and over hedge