Q4 (22%) You operate a US firm sourcing electronic components produced in Germany. Your firm will be paying 200,000 to a supplier in Germany in six months. You would like to hedge against the appreciation of Euro using a currency collar (i.e., combination of one call option and one put option). In order to maintain a sufficient level of working capital, you would like to make sure you will at most be paying (including the upfront hedging cost) US$236,000 in settling this Euro payment. At the same time, you would also like to benefit as Euro depreciates in paying as little USS cash flow as possible. You observe the following quotations of currency options on Euro. They are European options expiring in six months. Premium (per ) Strike rate Bid Ask Call option on US$1.177 US$0.0500 US$0.0505 Call option on US$1.16/ US$0.0525 US$0.0530 Put option on US$1.15/ US$0.0365 US$0.0370 Put option on US$1.14/ US$0.0335 US$0.0340 Given the above currency options, how will you set up your currency collar to best satisfy your objectives? What are the maximum and minimum hedged cash flows (in USS) by using the currency collar? Note: With two call and two put options to choose from, you can construct altogether four different currency collars. Choose the one that best satisfies your objectives. Explain your choice