Trident the same U.S.-based company discussed in this chapter, has concluded a second larger sale of telecommunications equipment to Regency (U.K.). Total payment of 2,000,000 is due in 90 days. Given the following exchange rates and interest rates, what is the break-even investment rate (for money market hedge) when comparing the forward hedge and money market hedge?

Assumptions		Value
90-day A/R in pounds		2,000,000.00
Spot rate, US$ per pound ($/)		$1.5610
90-day forward rate, US$ per pound ($/)		$1.5421
3-month U.S. dollar investment rate		4.000%
3-month U.S. dollar borrowing rate		6.000%
3-month UK investment interest rate		4.500%
3-month UK borrowing interest rate		8.000%
Put options on the British pound: Strike rates, US$/pound ($/)
Strike rate ($/)		$1.55
Put option premium		1.500%
Strike rate ($/)		$1.54
Put option premium		1.000%
Strike rate ($/)		$1.55
Call option premium		2.500%
Trident's WACC		9.000%
Maria Gonzalez's expected spot rate in 90 days, US$ per pound ($/)		$1.5431

Select one:

a. 0.76%

b. 3.06%

c. 2.00%

d. 1.52%

e. 3.20%