Pls do not handwrite the answer, this is for easy reading

Question 4:-

Ozfood Pty Ltd, a cookie manufacturing company based in Sydney, has received an order today. i.e. 7 October 2014, to sell 10,000 boxes of its best-selling product to a Japanese client. The amount to be paid by the client is 3.45 million AUD, but the invoice needs to be issued in Japanese Yen(JPY). At today's FX price of 1 AUD=100 JPY, the amount invoiced is therefore 345 million JPY and will be payable on January 7th, 2015. Laurie, OZfood's treasurer, is considering whether to hedge her receivable or not and has received the following quotations from her bank:

AUD/JPY Options Expiry in 3 months(American option) Premium in JPY per AUD

CALLS(AUD Call/JPY Put)	Strike price	Puts(AUD Put/JPY Call)
5.5	98	1.5
3.8	99	1.7
2.2	100	2.2
2	101	3.9
1.8	102	5.8

AUD/JPY Forward Rates

Period	Bid	Ask
1 months	99.9	99.94
2 months	99.8	99.85
3 months	99.75	99.78
6 months	99.55	99.59
12 months	99.25	99.28

a) What is the risk for Ozfood on this transaction? b) From the list of prices given above, select and describe an appropriate forward transaction and an appropriate option transaction that Laurie should enter to hedge her position/ c) Using the transaction selected above, compare the net proceeds in AUD received by Ozfood under the various hedging strategies ("do nothing", forward and option) when AUD/JPY on 7th January 2015 is 98,100 or 103. Results must be presented in the table below.

Do Nothing/Without hedge Forward Option

Hedge none transaction

Spot AUD/JPY Formula for Net AUD Proceeds Net AUD proceeds Formula for Net AUD Proceeds Net AUD Proceeds Formula for Net AUD Proceeds Net AUD Proceed 98 100 103