In April $2016,$ an FI bought a one$-$month sterling T$-$bill paying $100$ million in May $2016.$ The FI's liabilities are in dollars, and current exchange rate is $$1\mathrm{.}6401/1.$ The bank can buy one$-$month options on sterling at an exercise price of $$1\mathrm{.}60/1.$ Each contract has a size of $31,250,$ and the contracts currently have a premium of $$0\mathrm{.}014$ per $.$ Alternatively, options on foreign currency futures contracts, which have a size of $62,500,$ are available for $$0\mathrm{.}0106$ per $.$

What is the foreign exchange risk that the FI is facing, and what type of currency option should be purchased to hedge this risk?

A$)$ The FI should use call options to hedge the depreciation of the pound sterling.

B$)$ The FI should use call options to hedge the depreciation of the dollar.

C$)$ The FI should use put options to hedge the depreciation of the dollar.

D$)$ The FI should use put options to hedge the depreciation of the pound sterling.

E$)$ The FI should use put options to hedge the appreciation of the pound sterling.