In the above question (Question #3), suppose that in addition to its dollar holdings, your company has 1 million worth of one-year German government euro bonds. Which one of the following would be a better strategy regarding the dollar and euro holdings if you come to believe that the US interest rates will rise in the next couple of months, but other market participants continue to assume no change in US monetary policy? Assume that euro interest rates and other policies will not change in this year; and that you are acting on this strategy now (prior to a possible Fed action you are expecting).

a.Keep the portfolio unchanged.

b.Sell some of the euro bonds to buy more dollar bonds.

c.Use part of the dollar cash to increase the euro bond holding.

d.Sell some of the euro bonds and increase the dollar cash holding.

e.Sell some of the dollar bonds and use the proceeds to buy more euro bonds.