A U$.$S$.-$based MNC has recorded $300,000$ in its accounts payable today and is due to be settled

in $6$ months. The following rates and prices currently exist in the market:

$$ The spot exchange rate is $$1\mathrm{.}21/.$

$$ The $6-$month forward rate is $$1\mathrm{.}25/.$

$$ The Euro Zone $6-$month deposit rate is $4\%.$

$$ The U$.$S$.6-$month borrowing rate is $5\%.$

$$ The $6-$month Call option for Euros has an exercise price of $$1\mathrm{.}24/$uro and a premium of $$0\mathrm{.}03/$uro$.$

$$ The probability distribution of the expected spot rate between USD and $$uro in six months

is forecasted to be:

$$1\mathrm{.}20/----20\%$

$$1\mathrm{.}23/----20\%$

$$1\mathrm{.}25/----30\%$

$$1\mathrm{.}27/----30\%$

a$)$ Please analyze and evaluate alternative contractual hedging techniques that can be applied to this

position $($consider no hedge as an alternative$)$ with your detailed calculations.

b$)$ If you were the CFO of this multinational corporation, would you hedge against the transaction

exposure borne due to this position? If so$,$ which contractual hedging alternative would you choose and

why? Please justify your answer with the data and show your step$-$by$-$step calculations.