Your company will receive 25 million in 1 year from a German customer. You observe the following data. Use this information:

$: Spot Rate

$1.20:1.00

$: Forward Rate

$1.26:1.00

Cost of 1-year put or 1-year call

Exercise Price of $1.24:1

Per of exposure

2 US cents

1 Yr. $ interest rate

8.5%

1 Yr. interest rate

5.0%

Per 25 million of exposure

$500,000

The CEO wants certainty about the dollars the company will receive. Choose the hedge that guarantees you will receive that U.S. dollar amount. There are two options but pick one with the highest value:

a) Buy a put option on British Pounds

b) Forward Hedge

c) Buy a call option on British Pounds

d) Money Market Hedge