Your firm is a U.S.-based importer of Italian bicycles. AS AN IMPORTER, YOU ARE BUYING BICYCLES AND PAYING OUT EURO. You have placed an order with an Italian supplier for 60,000.00 worth of bicycles. Payment (in ) is due in 12 months. One-year at-the-money put and call options on 10,000 exist. The spot exchange rate is $1.1500/. In the next period, the euro can increase in dollar value to $1.25/ or fall to $1.05/. The interest rate in dollars is ig = 7.10%; the interest rate in the euro zone is ie = 5.00%. 1. Outline a strategy using spot exchange rates and borrowing or lending (i.e. a money market hedge) that that will redenominate this payable into USD. Your answer is a sentence. (5 points) 2. Calculate the net future value of your money market hedge. (5 points) show your work 3. Outline a strategy using the forward market that will hedge this payable into USD. Your answer is a sentence. (5 points) 4. Calculate the net future value of your forward market hedge. (5 points) show your work Your firm is a U.S.-based importer of Italian bicycles. AS AN IMPORTER, YOU ARE BUYING BICYCLES AND PAYING OUT EURO. You have placed an order with an Italian supplier for 60,000.00 worth of bicycles. Payment (in ) is due in 12 months. One-year at-the-money put and call options on 10,000 exist. The spot exchange rate is $1.1500/. In the next period, the euro can increase in dollar value to $1.25/ or fall to $1.05/. The interest rate in dollars is ig = 7.10%; the interest rate in the euro zone is ie = 5.00%. 1. Outline a strategy using spot exchange rates and borrowing or lending (i.e. a money market hedge) that that will redenominate this payable into USD. Your answer is a sentence. (5 points) 2. Calculate the net future value of your money market hedge. (5 points) show your work 3. Outline a strategy using the forward market that will hedge this payable into USD. Your answer is a sentence. (5 points) 4. Calculate the net future value of your forward market hedge. (5 points) show your work