Fashion Shoes Inc.manufactures its shoes in Milano,Italy.The company just received an order from the United States for USD 1 million to be received in one year.The current spot rate is EUR 1/USD and the 1 year forward rate is EUR 1.01/USD.The current interest rates are 4% in the United States and 5% in Italy.A call option on the US dollar is available with a strike price of EUR 1.01/USD and a premium of EUR 0.03 and a put option is available with a strike price of EUR 1/USD and a premium of EUR 0.025/USD.Determine the net proceeds from a forward hedge and an options hedge.Which option should Fashion Shoes use?

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The Answer of Fashion Shoes Inc.manufactures its shoes in Milano,Italy.The company just received an order from the United States for USD 1 million to be received in one year.The current spot rate is EUR 1/USD and the 1 year forward rate is EUR 1.01/USD.The current interest rates are 4% in the United States and 5% in Italy.A call option on the US dollar is available with a strike price of EUR 1.01/USD and a premium of EUR 0.03 and a put option is available with a strike price of EUR 1/USD and a premium of EUR 0.025/USD.Determine the net proceeds from a forward hedge and an options hedge.Which option should Fashion Shoes use?