TEK wishes to hedge a EUR4,000,000 account receivablearisingfrom a sale to Olivetti(Italy). Payment from Olivettis due inthree months. TEK's Italianunit does not have ready accessto local currency borrowing, eliminatingthe money market hedge alternative. Citibankhas offered TEK the following quotes Spotrate 3 month forward rate Three month euro interest 3mont put optiononeurosafstrikepnceof USD1.080O/EUR TEK'S weighted average cost of capital USD1 2180EUR rate peryear 34% 8% What are the costs of its payment hedging alternatives ifituses the forward and options markets? Diagram these altenatives using the graphs provided in the PowerPoint notes adjustedfor the data in this question What are the risks of each alternative? a. b. c. Which altenative should TEK choose ifit prefers to play it safe"? d. Which altemative should TEK choose if it is willing to take a reasonable riskandhas a directional view that the euro may be appreciatingversusthe dollar during the next three months