Your company with operations in the US has sold a shipment of goods to a German firm for Euro 1,000,000 receivable in six months time. The current exchange rate is Euro 1/$1.2342 and the six month forward rate is Euro I$/ 1.2508.

a)How much would your company receive when they use a forward hedge?

b)Your company affiliate in Germany can borrow in Germany at a rate of 3% per annum, while you can invest in the US at a rate of 5%. P.a. How much would your firm receive in six months dollar terms, if you use a money market hedge?

c)A six month put option on Euros can be purchased for $20,000 with a strike price of Euro I/ $1.25. How much would an option hedge net the company (net and in six months) if the Euro closes at $1.2562 per Euro on settlement date?