$1.$ A U$.$S$.$ based MNC has contracted to sell $250$ million electronic chips to a

Chinese firm for $12\mathrm{.}2$ Yuan each. The chips are to be delivered and paid for

in $4$ months. The current exchange rate between Yuan and the $ is $$1\mathrm{.}00$

equals $7\mathrm{.}217$ Yuan. At today$$s exchange rate how much will the firm be paid

for the chips in dollars? $250*12\mathrm{.}2=3,050$mil

$3,050*1/7\mathrm{.}217=422\mathrm{.}82$ million Dollars

$2.$ Consider the information provided in #$1$ above. In four months, when the

chips are delivered and paid for, the exchange rate is $$1\mathrm{.}00$ equals $7\mathrm{.}5$ Yuan.

How many dollars will the U$.$S$.$ firm receive for the chips?

$3.$ Consider the information provided in #$1$ and #$2$ above. Carefully explain how

the U$.$S$.$ firm could use $(1)$ a forward contract for foreign exchange, $(2)$ a

futures contract for foreign exchange, and $(3)$ an option contract for foreign

exchange to hedge their position to protect their profits for this transaction.