Evar Imports, Inc., buys chocolate from Switzerland and resells it in the United States. It just purchased

Question:

Evar Imports, Inc., buys chocolate from Switzerland and resells it in the United States. It just purchased chocolate invoiced at SF62, 500. Payment for the invoice is due in 30 days. Assume that the current of the Swiss franc is $.74. Also assume that three call options for the franc are available. The first option has a of $.74 and a premium of $.03; the second option has a of $.77 and a premium of $.01; the third option has a of $.80 and a premium of $.006. Evar Imports is concerned about a modest appreciation in the Swiss franc.
a. Describe how Evar Imports could construct a bull spread using the first two options. What is the cost of this hedge? When is this hedge most effective? When is it least effective?
b. Describe how Evar Imports could construct a bull spread using the first option and the third option. What is the cost of this hedge? When is this hedge most effective? When is it least effective?
c. Given your answers to parts (a) and (b), what is the tradeoff involved in constructing a bull spread using call options with a higher exercise price?

Strike Price
In finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity. Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...