Mr. Fulton, a collector based in the United States, just sold one of his Stradivarius violins to a German buyer for 10,000,000, payable in six months. The current spot exchange rate is $1.05/ and the six-month forward exchange rate is $1.10/. Mr. Fulton can buy a six-month put option on euros with a strike price of $1.08/ for a premium of $0.01 per euro. Currently, the six-month euro interest rate is 4% per annum and the six-month USD interest rate is 5% per annum.

b) Suppose Mr. Fulton hedges his euro receivables with an options market hedge.

(i) How much does he need to pay now to buy the put option?

(ii) Using the current forward exchange rate as the predictor for the future spot exchange rate, how much is Mr. Fulton expected to receive in USD in six months, after taking the option costs into account?