a) Suppose a U.S corporation bids for the right to import a machine from Europe, and if it wins the bid will need to pay 1 million Euros in 90 days' time. What position has the importer taken in Euros, if any? What is the nature of the currency risk is the importer concerned about? What is the best available foreign exchange instrument for this corporation in hedging the risk(s) it faces? Rationalize your choice. b) Suppose that on the first day, the U.S. corporation learns that it has won the contract to import the machine. Assuming it did not hedge through the alternative you discussed in a). What position does it have now in Euros, if any? Consider two alternative hedging strategies for the importer: One is to buy 1 million Euros 90 days forward, and the other is to borrow dollars for 90 days, use them to buy and lend Euros for 90 days, and use the proceeds of the Euro loan to pay its Euro obligation in 90 days' time. Explain these two alternatives in detail. Assume that the firm receives the machine in the US and sells it within the 90-day period of trade credit. Argue that the two strategies are equivalent. a) Suppose a U.S corporation bids for the right to import a machine from Europe, and if it wins the bid will need to pay 1 million Euros in 90 days' time. What position has the importer taken in Euros, if any? What is the nature of the currency risk is the importer concerned about? What is the best available foreign exchange instrument for this corporation in hedging the risk(s) it faces? Rationalize your choice. b) Suppose that on the first day, the U.S. corporation learns that it has won the contract to import the machine. Assuming it did not hedge through the alternative you discussed in a). What position does it have now in Euros, if any? Consider two alternative hedging strategies for the importer: One is to buy 1 million Euros 90 days forward, and the other is to borrow dollars for 90 days, use them to buy and lend Euros for 90 days, and use the proceeds of the Euro loan to pay its Euro obligation in 90 days' time. Explain these two alternatives in detail. Assume that the firm receives the machine in the US and sells it within the 90-day period of trade credit. Argue that the two strategies are equivalent