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	200,000 euro	nok/eur 8
2	0.5	200,000 euro	nok/eur 11
3	0.25	200,000 euro	nok/eur 15

The company is using the following information in order to decide its hedging options

- 6-months Risk-free rate 1.50% (norway) (0.50%euro)

- Spot exchange rate (NOK/EUR): 10

a) Compute the economic exposure (i.e., the regression coefficient b).

b) Show detailed steps of a hedging strategy using money market instruments.

c) Now detail a hedging strategy using a forward.

d) Compute the standard deviation of the hedged position. What is your interpretation of the results? Comment in less than one line.