Case 2 A U.S. fund manager who bought 100 million in Australian dollar (AS) bonds when the A at USS/AS economic performance. He decides to set S/AS to risk from the current level of S/AS 0.7850 (spot). The fund manager doesn't mind forego profit opportunities from a further upward move in the AS and is uncertain how long the bonds. He sets the year end as his time horizon. By utilizing the data below, which hedging strategy should the fund manager adopt? S was 0.72 is worried that the AS might depreciate because of disappointing Australian 0.72 as the maximum downside loss that he wants he will hold Currency Exchange Rate Interest Rate Contract Spot Forward US Foreign Option Type Strike Maturity Prem ium per FC 0.0176 0.007211 0.007234 1.50 1.4818 3.2 5.8657 CALL 1.5 60 S/E S/AS 0.785 0.76 S/AS 0.785 0.76 3.2 5.7892 PUT 0.72 195 3.2 5.7892 CALL 0.8025 195