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ABC corporation has just sold equipment to a French company exports worth FF 80 million...

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Finance

ABC corporation has just sold equipment to a French company exports worth FF 80 million with payment due in three months. The spot rate is FF 7.4/$ and the 3 month forward rate is FF 7.5/$. Also assume: 3 month French interest rate 9.00% p.a. 3 month U.S. interest rate 4.00% p.a. 3 month call option on Francs at FF 7.5/$ (strike price) 3.0% premium 3 month put option on Francs at FF 7.5/$ (strike price) 2.4% premium a) How can ABC hedge this risk? b) Which alternative would you choose and why?

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