Question: Recommend a hedging solution for the company by showing the following:

a) Do nothing b) Hedge in the forward market c) Hedge in the money market d) Hedge in the options market

Question 1. A US company has an account receivable of 1,000,000 million ( sterling), due in 60 days. The company's treasury team has received foreign exchange and interest rate quotations, shown in Table 1 below. Recommend a hedging solution for the company + Table 1: 60-day A/C Receivable GBP 1,000,000 US company cost of capital 7.00% per annum Current spot FX rate $1.2900 per/GBP JP Morgan 60-day Fwd rate $ 1.2950/GBP JP Morgan 90-day Fwd rate 1.2910/ GBP Company FX Advisor Forecast 60-day Spot $1.2960/GBP USA UK 60-day borrowing rate 3.00% 3.20% 60-day deposit interest rate 2.00% 2.20% Call Option Put Option 2.00% 1.00% Option premium Strike Price USD $ /per GBP $ 1.30 $ 1.30