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A U.S. firm holds an asset in Great Britain and faces the following scenario: Probability...

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A U.S. firm holds an asset in Great Britain and faces the following scenario: Probability Spot rate p State 1 25% $ 2.20/5 3,000 $6,600 State 2 50% $ 2.00/ 2,500 $5,000 State 3 25% $ 1.80/8 2,000 $3,600 where, p = Pound sterling price of the asset held by the U.S. firm P=Dollar price of the same asset Which of the following would be an effective hedge? Sell 7,500 forward at the 1-year forward rate, 5 ($/), that prevails at time zero. O Buy 2,500 forward at the 1-year forward rate, 5(S/E), that prevails at time zero. O Sell 25,000 forward at the 1-year forward rate, 5($/), that prevails at time zero. none of the options References Difficult 2 Medium

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