Suppose that you work for Westinghouse Electric Company. You are bidding to design a new nuclear power station in Bulgaria. If you win the bid you will receive EUR 100,000,000. You have collected the following market data (I am using the most recent data on Feb.207,2021).

Spot: USD 1.2073/EUR

Forward: USD 1.2180/EUR

12-month USD Libor: +0.28375%

12-month EUR Libor: -0.48014%

WACC: 6%

Call option: strike price USD 1.2300/EUR, premium USD 0.0245/EUR

Put option: strike price USD 1.2300/EUR, premium USD 0.0306/EUR

Note: how to compute the call premium: 0.0245*100,000,000

1. Suppose that you want to hedge with an option. What do you have to do?

- buy the put option

- buy the call option

- sell the put option

- sell the call option

2. Suppose that you hedged with the option. What will be your revenue if the spot rate is USD 1.2100/ EUR?