Assume that Mohawk Co., a US-based MNC, must make a payment of 1,000,000 Australian dollars in one year. The current spot rate on Australian dollar is US$0.75. The oneyear forward rate on Australian dollar is $0.76. The firms foreign exchange analyst created a probability distribution for the Australian dollar spot rate 12 months from now as follows:

Future Spot Rate, US$ per one AU$		Probability%
$0.75		25%
$0.76		60%
$0.77		15%

Assume the firm can purchase oneyear call options on Australian dollars with an exercise price of $.76 and a premium of $.02 per unit.

The firm also has access to the money markets with the following APRs.

	U.S.	Australia
Deposit rate	1%	2%
Borrowing rate	4%	5%

Given this information, determine whether a forward hedge, money market hedge, currency options hedge, or an unhedged strategy would be most appropriate for this firm in this situation. Explain your recommendation and provide evidence to support your answer.