Your firm, which is based in the U.S., has a €10,000 payable due in 1 year. You are considering hedging against FX risk by purchasing a call option with an exercise price of $1.05/€ and a premium of $0.03/€. The current one-year forward rate is €0.98/$, and the one-year US interest rate is 1.5%. If the forward rate is best predictor of the future spot rate, then the expected future dollar cost of the payable is:
a. $10,804.50
b. $10,500
c. $10,800
d. $10,200
e. $10,504.50