1. The following graph represents the hedging options for an accounts receivable in British pounds. Give the correct hedging decision (how the firm should hedge) for each of the following risk and expected spot price scenarios:
   1. Risk averse and expected spot at expiration is $1.44
   2. Risk averse and expected spot at expiration is $1.50
   3. Risk averse and expected spot at expiration is $1.57
   4. Risk tolerant and expected spot at expiration is $1.44
   5. Risk tolerant and expected spot at expiration is $1.50
   6. Risk tolerant and expected spot at expiration is $1.57

Accounts Receivable in British Pounds Strike $1.50, call premium $.02, put premium $.03, forward $1.50 1.6 1.55 1.5 Value of A/R per unit 1.45 1.4 1.42 1.43 1.44 1.45 1.46 1.47 1.48 1.49 1.5 1.51 1.52 1.53 1.54 1.55 1.56 1.57 1.58 Spot price at expiration unhedged buy fwd buy put sell call Accounts Receivable in British Pounds Strike $1.50, call premium $.02, put premium $.03, forward $1.50 1.6 1.55 1.5 Value of A/R per unit 1.45 1.4 1.42 1.43 1.44 1.45 1.46 1.47 1.48 1.49 1.5 1.51 1.52 1.53 1.54 1.55 1.56 1.57 1.58 Spot price at expiration unhedged buy fwd buy put sell call