Your company $($in the US$)$ just purchased materials from a supplier in Germany for EUR $30$ million, with payment in $90$ days.

Suppose the spot and $90-$day forward USD$/$EUR exchange rates are respectively, $1\mathrm{.}15$ and $1\mathrm{.}16.$ Suppose further that the $90-$day interest rates in USD and EUR are respectively, $3\%$ and $2\%.$

You are considering hedging your EUR exposure using either a forward hedge or a market hedge.

Question $1($forward hedge$)$: Suppose you are considering entering a forward contract to deliver USD and receive EUR $30$ million in exactly $90$ days. What USD amount would you have to deliver in $90$ days?

Choose one of the following answers: A$,$ B$,$ C or D

A $=$ USD $34\mathrm{.}80$ million

B $=$ USD $34\mathrm{.}50$ million

C $=$ USD $26\mathrm{.}09$ million

D $=$ USD $25\mathrm{.}86$ million

Question $2($market hedge$)$: As an alternative, you also consider exchanging USD for EUR at the spot rate, and earning interest on the EUROs in an EUR$-$denominated account for $90$ days. How much USD would you have to exchange today at the spot rate such that in $90$ days you will have exactly EUR $30$ million in your EUR$-$denominated account?

Choose one of the following answers: A$,$ B$,$ C or D

A $=$ USD $34\mathrm{.}84$ million

B $=$ USD $34\mathrm{.}49$ million

C $=$ USD $33\mathrm{.}82$ million

D $=$ USD $29\mathrm{.}41$ million

Question $3$: Would you prefer the forward or the market hedge?

Choose one of the following answers: A$,$ B$,$ or C

A $=$ Forward hedge

B $=$ Market hedge

C $=$ Both