Your firm is exposed to $20 million in foreign exchange rate risk through its deposit at a german bank and wants to use euro contracts to hedge.

Your firm is exposed to $20 million in foreign exchange rate risk through its deposit at a german bank and wants to use euro contracts to hedge. The CME offers euro contracts for 125,000 euros and the euro currently equals $1. What should your firm do to fully hedge this exchange rate risk?

A: Buy 160 CME euro contracts

B: Sell 160 CME euro contracts

C: Buy 40 CME euro contracts

D: Sell 40 CME euro contracts

E: None of the above