Your Firm Is a U

Your firm is a U.K.-based exporter of British bicycles. You have sold an order to an Italian firm for €1,000,000 worth of bicycles. Payment from the Italian firm (in €) is due in twelve months. Your firm wants to hedge the receivable into . Not dollars. Use the following table for exchange rate data. Detail a strategy using futures contracts that will hedge your exchange rate risk. Have an estimate of how many contracts of what type.

A) Borrow €970,873.79 in one year you owe €1m, which will be financed with the receivable. Convert €970,873.79 to dollars at spot, receive $1.165.048,54. Convert dollars to pounds at spot, receive £728.155.34.
B) Sell €1m forward using 16 contracts at $1.20 per €1. Buy £750,000 forward using 12 contracts at $1.60 per £1.
C) Sell €1m forward using 16 contracts at the forward rate of $1.29 per €1.
D) Sell €1m forward using 16 contracts at the forward rate of $1.29 per €1. Buy £750,000 forward using 12 contracts at the forward rate of $1.72 per £1.