Suppose that the exchange rate is 1.25 = 1.00. Options (calls and puts) are available on the London exchange in units of 10,000 with strike prices of 0.80 = 1.00. Options (calls and puts) are available on the Frankfurt exchange in units of 10,000 with strike prices of 1.25 = 1.00. For a French firm to hedge a 150,000 receivable,

A. buy 8 call options on the pound with a strike in euro. B. buy 15 put options on the pound with a strike in euro. C. buy 10 put options on the pound with a strike in euro and buy 12 call options on the euro with a strike in pounds.

D. buy 15 put options on the pound with a strike in euro and buy 12 call options on the euro with a strike in pounds.

E. buy 10 put options on the pound with a strike in euro and buy 8 call options on the euro with a strike in pounds.

SELECT ONE