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LFC is a US-based corporation. It exported goods and billed 10 million which will be...

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Finance

LFC is a US-based corporation. It exported goods and billed 10 million which will be received in one year. The information in the financial market is as follows: US interest rate: 6.10% per annum. UK interest rate: 9.00% per annum. spot exchange rate: $1.50/. Forward exchange rate: $1.46/ (1-year maturity). Suppose that in the over-the-counter market the company purchased a put option on 10 million British pounds with an exercise price of $1.46 and a one-year expiration. Assume that the option premium (price) was $0.02 per pound. Assume that the future spot exchange rate turns out to be $1.30 Analyse possible hedging techniques that can be done? Which technique that the company choose? Should the company do hedging? Explain your answer

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