Maria Gonzalez, CFO of Trident, has just concluded a sale to Regency, a British firm, for

2,000,000

The sale is made in May for settlement due in 6 months' time, August

a. Assumptions

i. Spot rate is $1.10/

ii. 6 month forward rate is $1.00/

iii. Trident's cost of capital is 10.0% p.a.

iv. iv. UK 6 month borrowing rate is 8.0% p.a.

v. UK 6 month investing rate is 6.0% p.a.

b. Assumptions

i. US 6 month borrowing rate is 12.0% p.a. ii. US 6 month investing rate is

10.0% p.a. iii. August put option in OTC market for 1,000,000; strike

price $1.05; 1% premium

iv. Trident's foreign exchange advisory service forecasts future spot rate in 3

months to be $1.04/

What is the outcome 6 months from now, if Maria adopts the following? Show

your calculation clearly and summarize the outcome in the figure provided:

(A) Remain unhedged

(B) Hedge in the forward market

(C) Hedge in the money market

(D) Hedge in the options market