Instruction 10.1: Use the information for the following problem(s). Plains States Manufacturing has just signed a contract to sell agricultural equipment to Boschin, a German firm, for euro 1,250,000. The sale was made in June with payment due six months later in December. Because this is a sizable contract for the firm and because the contract is in euros rather than dollars, Plains States is considering several hedging alternatives to reduce the exchange rate risk arising from the sale. To help the firm make a hedging decision you have gathered the following information. The spot exchange rate is $1.40/euro The six month forward rate is $1.38/euro Plains States' cost of capital is 11% The Euro zone 6-month borrowing rate is 9% (or 4.5% for 6 months) The Euro zone 6-month lending rate is 7% (or 3.5% for 6 months) The U.S. 6-month borrowing rate is 8% (or 4% for 6 months) The U.S. 6-month lending rate is 6% (or 3% for 6 months) December put options for euro 625,000; strike price $1.42, premium price is 1.5% Plains States' forecast for 6-month spot rates is $1.43/euro . . . . . . 1. Refer to Instruction 10.1. If Plains States chooses not to hedge their euro receivable, the amount they receive in six months will be 2. Refer to Instruction 10.1. If Plains States chooses to hedge its transaction exposure in the forward market, it will euro 1,250,000 forward at a rate of 3. Refer to Instruction 10.1. Plains States chooses to hedge its transaction exposure in the forward market at the available forward rate. The payoff in 6 months will be 4. Refer to Instruction 10.1. If Plains States locks in the forward hedge at $1.38/euro, and the spot rate when the transaction was recorded on the books was $1.40/euro, this will result in a "foreign exchange loss" accounting transaction of 5. Refer to Instruction 10.1. Plains States would be (worse/better) off by an amount equal to with a forward hedge than if they had not hedged and their predicted exchange rate for 6 months had been correct