A small American company wishes to hedge its anticipated income from sales in Australian dollars. It buys 2 option put contracts (each worth 10,000 Australian dollars) to sell the Australian dollar at rate of $0.75 per AUD in 2 months. The premium to purchase the put is 2 cents ($0.02) per AUD or $200 per 10,000 AUD contract. If the exchange rate is $0.735 per AUD at the end of the time period, will the option be exercised? Why or why not? Both whether or not the contract is exercised and the "why or why not" must be correct. Choose the best answer. Group of answer choices

Yes, the option will be exercised because the company will make money on the exchange, due to translation effects, over and above the cost of the premium and the cost of the difference between the exercise price and the current exchange rate.

Yes, the option will be exercised. The option is in the money. The company will receive $0.75 per AUD, which is more than the $0.735 per AUD it would receive on the open market.

No, the option will not be exercised. The strike price is higher than the current exchange rate.

No, the company will not exercise the option. The company paid 2 cents per contract. Therefore, it would only get $0.73 per AUD.