Pion Resorts is planning to receive BR67,000,000 (Brazilian Real) in dividends

from its affiliates in Brazil, in three months. The current spot rate is BR3.2500/US$ and the three

month forward rate is BR5.4875/US$. Three-month options (calls and puts) are quoted at

BR5.5200/US$ with a premium of BR$.0600/US$. Assume you can hedge the full amount with an

option contract. Economic conditions have deteriorated in Brazil, and inflation is hitting 4.5% per

month. Current inflation in the United States is 1% per month. In response to these conditions, the

Brazilian Central Bank is devaluing its currency once a month, according to a crawling peg. 1 The

Brazilian affiliate of Pion can take loans at 48% annual rates, while interest rates in the US are 3%.

What should Pion Resorts do regarding the reception of its dividends? What would be your suggestion when hedging? NOTE: You can calculate the annual inflation rates by compounding the monthly inflation rates, so you can have an expected exchange rate in three months by using Relative PPP.