Question: Johanna International Mercantile Corporation has made a 15 million investment
Johanna International Mercantile Corporation has made a $15 million investment in a stamping mill located in northern Germany and fears a substantial decline in the Euro's spot price from $1.56 to $1.50, lowering the value of the firm's capital investment. Johanna's principal U.S. bank advises the firm to use an appropriate option contract to help reduce Johanna's risk of loss. What currency option contract would you recommend? Explain why the contract you selected would help to reduce the firm’s currency risk .
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