Question: A) Given the following data, detail the hedging strategy using Options Contracts Net Exposure 50,873,878 Contract: Euro September $1.25 Puts @ $.0255/Euro Size: 125,000 Euros

A) Given the following data, detail the hedging strategy using Options Contracts

Net Exposure 50,873,878

Contract: Euro September $1.25 Puts @ $.0255/Euro

Size: 125,000 Euros

Spot rate: $1.2307/ Euro

6 month forward rate: $1.2485/ Euro

B) If the cost of capital is 11.5675%, what is the cost of the option strategy?

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