What is the outcome of each hedging possibility

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Tektronix Inc., an Oregon-based multinational, manufactures scientific instruments. Jerry Davies, Treasurer, needs to choose an instrument to hedge a € 2,000,000 sale to Siemens in Germany, with payment due in six months. He has obtained the following quotes from Citibank:

Spot rate (EUR/USD): 1.3538
Six-month forward rate: 1.3687
Six-month euro interest rate 3.1250%
Six-month USD interest rate 6.0000%

Premiums on six-month options

Call option on euros at strike $1.42 $0.012
Put option on euros at strike $1.42 $0.061
Call option on euros at strike $1.40 $0.074
Put option on euros at strike $1.40 $0.007

Problem 1: What is the outcome of each hedging possibility?

Reference no: EM132762525

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