Will she over hedged or under hedged

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Reference no: EM131993446

An importer, Sarah, needs to protect her one year account payable of £61, 000 by a call option for $.01 per pound premium to avoid pound appreciation against USD. X= $1.50 per £ Option size 31,250 units S0 =$1.52 per £ Exercised at St= $1.54/£ How many option contracts does she need? will she over hedged or under hedged? 1 contracts and over hedged 2 contracts and under hedged Neither over hedged nor under hedged 2 contracts and over hedged.

Reference no: EM131993446

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