Question: Eric is purchasing a put option to hedge his transaction exposure. It has an underlying asset of MXN 249,366, a strike price of USD 0.057

Eric is purchasing a put option to hedge his transaction exposure. It has an underlying asset of MXN 249,366, a strike price of USD 0.057 per MXN. What is his payoff on this option if at maturity the spot rate is USD 0.044 per MXN, and the present value of the option premium is USD 2,319? Please give your answer to the nearest US dollar.

Assuming Eric has set up his hedge correctly, and has completely hedged his transaction exposure, what foreign currency is Eric exposed to? What is the size of his exposure? Does he owe foreign currency, or is he owed foreign currency? You may assume that Eric does his books in USD.

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