A U.S. exporter has a 1,000,000 receivable due in one year. Suppose the current spot exchange rate S($/) = $1.2/, the one-year forward exchange rate F360($/) = $1.25/, the annual U.S. interest rate i$ = 5%, and the annual euro zone interest rate i = 4%.

a. How to implement a hedge using a forward contract? Compute the guaranteed dollar proceeds in one year using the forward hedge.

b. How to implement a money market hedge? Compute the guaranteed dollar proceeds in one year using money market hedge.

c. If the U.S exporter decides to hedge using put option on euros, what would be the dollar proceeds in one year? Assume that the spot exchange rate S($/) = $1.25/ in one year. Also suppose that a one-year put option on euros has an exercise price of $1.23/ and a premium of $0.02/.