Your firm is a U.K.-based exporter of British bicycles. You have sold an order to an Italian firm for €1,000,000 worth of bicycles. Payment from the Italian firm (in €) is due in twelve months. Your firm wants to hedge the receivable into pounds. Not dollars.

Interest rates are 3% in €, 2% in $ and 4% in £.

Detail a strategy using spot exchange rates and borrowing or lending that will hedge your exchange rate risk.