3. Crime and Punishment, a US company has made a contract to sell axes to a retailer in Germany for 1,000,000. The sale was done in June with payment due three months later in September. "Crime and Punishment considers the hedging alternatives to diminish the exchange rate risk which arises from the sale. Crime and Punishments treasurer, Mr. Raskolnikov gathered the following information. The spot exchange rate is $1.25/euro Raskolnikov's forecast for 3-month spot rates is $1.20/euro The three month forward rate is $1.22/euro October call options for 500,000; strike price $1.23, premium price is 1% October put options for 500,000; strike price $1.23, premium price is 1% Annual WACC is 4%. Which hedging alternative will be better off than, if he had not hedged and his predicted exchange rate for 3 months had been correct? Show the calculations for different hedging alternatives. (20 pts)