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Your company is scheduled to receive a payment of 7,250,000 in 30 days in the future. Assume that you can borrow and lend at a
Your company is scheduled to receive a payment of 7,250,000 in 30 days in the future. Assume that you can borrow and lend at a 6% p.a. U.S. interest rate. You observe the following data: Spot rate: $1.33877 44-day Forward rate: $1.3168/ American call option on euros at the strike price of $1.291 $0.0393/ American put option on euros at the strike price of $1.29/ $0.0158/ To hedge the transaction risk, should you buy the call or put option on euro and what is the minimum dollar revenue your company will receive when fully hedged with the option? O Buy put option on euro; the minimum dollar revenue is $7.96 million O Buy call option on euro; the minimum dollar revenue is $5.25 million Buy call option on euro, the minimum dollar revenue is $8.54 million (Alt + A) Buy put option on euro; the minimum dollar revenue is $9.23 million
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