Please solve the first 2 points worth 5 & 10 points respectively

2. (25 points) A Norwegian firm imports cheese from France. The company has a payment of Euro (EUR) 200,000 due in 6 months and the risk management team of the company comes up with the following scenarios that could realize in 6 months: State Probability Revenues (P*) S 1 0.25 EUR 200,000 NOK/EUR 8 2 0.5 EUR 200,000 NOK/EUR 11 3 0.25 EUR 200,000 NOK/EUR 15 The company is using the following information in order to decide its hedging options: Norway 1.50% Euro 0.50% - 6-months Risk-free rate Spot exchange rate (NOK/EUR): 10 a) (5 points) Compute the economic exposure (i.e., the regression coefficient "b"). b) (10 points) Show detailed steps of a hedging strategy using money market instruments. 2. (25 points) A Norwegian firm imports cheese from France. The company has a payment of Euro (EUR) 200,000 due in 6 months and the risk management team of the company comes up with the following scenarios that could realize in 6 months: State Probability Revenues (P*) S 1 0.25 EUR 200,000 NOK/EUR 8 2 0.5 EUR 200,000 NOK/EUR 11 3 0.25 EUR 200,000 NOK/EUR 15 The company is using the following information in order to decide its hedging options: Norway 1.50% Euro 0.50% - 6-months Risk-free rate Spot exchange rate (NOK/EUR): 10 a) (5 points) Compute the economic exposure (i.e., the regression coefficient "b"). b) (10 points) Show detailed steps of a hedging strategy using money market instruments