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Global Electronics wishes to hedge its $15 million in dollar receivables coming due in 60 days. In order to reduce its net cost of hedging

Global Electronics wishes to hedge its $15 million in dollar receivables coming due in 60 days. In order to reduce its net cost of hedging to zero, however, GE sells a 60-day dollar call option for $15 million with a strike price of J$98/US$ and uses the premium of $314,000 to buy a 60-day $15 million put option at a strike price of J$90/US$.

Graph the payoff on GE's hedged position over the range J$80/US$- J$110/US$. What risk is GE subjecting itself to with this option hedge?

You can submit an image of your graph. Graphs can be hand-drawn.

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