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What is the best possible hedging strategy

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Tesla Inc. is expecting to receive 100,000 euro in one year. Tesla expects the spot rate of euro to be $1.49 in a year, so it decides to avoid exchange rate risk by hedging its receivables. The spot rate of the pound is quoted at $1.51. The strike price of put and call options are $1.54 and $1.53 respectively. The premium on both options is $.03. The one-year forward rate exhibits a 2.65% premium. What is the best possible hedging strategy and how many U.S. dollars Tesla will receive under this strategy?

Reference no: EM131950967

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