A U.S. firm has sold an Italian firm €1,000,000 worth of product. In one year the U.S. firm gets paid. To hedge, the U.S. firm bought put options on the euro with a strike price of $1.65. They paid an option premium $0.01 per euro. Assume the one-year dollar interest rate is 6.1% and at maturity, the exchange rate is $1.6. what will be firm's realization on the sale net of the cost of hedging?

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The US firm sold 1000000 worth of products to the Italian firm which means they are owed 1000000 in ... View the full answer