You are the financial manager of The Heaven plc: a British company which has just signed a contract for the sale of gas turbine equipment in France for 2,000,000 in a years time. You have collected the following data relevant to this project

Spot exchange rate: 0.8 = 1

One year forward exchange rate 0.9 = 1

European one year interest rate 5%

British one year interest rate 2%

Price of a put option for 2,000,000 at an exercise price of 0.85 per pound: 300,000

(1) Identify and calculate all three hedge strategy 12 marks

Discussions and recommendation 8 marks