At what future spot exchange rate will you be indifferent, Finance Basics

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At what future spot exchange rate will you be indifferent

Problem

You plan to buy a car in three months in USD. The price for the car will be USD20,000. The spot exchange rate is CAD1.335/USD, and the six-month forward rate is CAD1.35/USD. You can also buy the six-month call option on USD with an exercise price of CAD1.34/USD for the premium of CAD0.04 per USD. The six-month interest rate is 12% per annum in the United States and 6% per annum in Canada. At what future spot exchange rate will you be indifferent between the forward and option market hedges?

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