Suppose that the exchange rate is €1.25 = £1.00.Options (calls and puts) are available on the Philadelphia exchange in units of €10,000 with strike prices of $1.60/€1.00.Options (calls and puts) are...

Suppose that the exchange rate is €1.25 = £1.00.Options (calls and puts) are available on the Philadelphia exchange in units of €10,000 with strike prices of $1.60/€1.00.Options (calls and puts) are available on the Philadelphia exchange in units of £10,000 with strike prices of $2.00/£1.00. For a U.S. firm to hedge a €100,000 receivable,

Multiple Choice

• buy 10 put options on the pound with a strike in dollars.


• buy 10 call options on the euro with a strike in dollars.


• sell 8 put options on the pound with a strike in dollars.


• sell 10 call options on the euro with a strike in dollars.