## Finance Problem

Assume that Fred wants to buy 100 Euros for $100 two months from now and the current price of Euro is 1==Eur=$ (1.0/0.95) = $1.0526. to 4 decimals. Assume that the$/Euro either goes up by 5% with a probability of 60% or down by 5% with a probability of 40% and the bank loan interest rate is 1% per month. What will Alice’s hedging strategy with Fred be?