Assume that Nike has a contract to receive 64 million Canadian Dollars (CAD) in 150 days. • The current spot rate is $0.667 per CAD • The 150-day future rate is $0.679 per CAD • Annualized money market rates are 4.41% in Canada and 7.30% in the US • A 150-day call with a strike of $0.65 is selling for $0.041 • A 150-day put with a strike of $0.70 is selling for $0.022 a. If you wanted to hedge, explain how Nike could do that with the future, the call, and the put (would it buy or sell each and why)? b. If Nike wanted to do a money market hedge, explain how that would be constructed (where would Nike borrow money and where would it invest)? Nike would borrow in Canada and invest in the US. Suppose Nike expected the spot price in 150 days to be: i. $0.610 with 10% probability ii. $0.635 with 15% probability iii. $0.660 with 22% probability iv. $0.685 with 30% probability v. $0.710 with 20% probability vi. $0.735 with 3% probability c. If Nike remained unhedged, what is its expected revenue in dollars in 150 days? d. If Nike used a future hedge, what is its expected revenue in dollars in 150 days? e. If Nike used a call hedge, what is its expected revenue in dollars in 150 days? f. If Nike used a put hedge, what is its expected revenue in dollars in 150 days? If Nike used a money market hedge, what is its expected revenue in dollars in 150 days? g. If Nike is risk neutral, which approach should they take and why? h. If Nike is some degree of risk averse, are there any of the approaches that shouldn’t even be considered (because they are completely dominated by another approach)?