. Alpha India Limited, an Indian textile exporting company, is expected to receive 5 million US dollars on July 30, 2020 for its export orders from USA. The Finance Controller of Alpha India Limited is worried about the foreign exchange risk involved in the receipt of 5 million US dollars on July 30, 2020. The current spot exchange rate is 1$ = Rs. 75.The Finance Controller of Alpha Limited considers the following three strategies.

Strategy A is to use put options on the US dollar with strike price 1$ = Rs. 73 and maturity date of July 30, 2020. These puts are currently selling for Rs. 2 each.

Strategy B is to use call options on the US dollar with strike price 1$ = Rs. 77 and maturity date of July 30, 2020.The calls are also currently selling for Rs. 2 each.

Strategy C is to use put options on the US dollar with strike price 1$ = Rs. 73 and maturity date of July 30, 2020; and also to use call options on the US dollar with strike price 1$ = Rs. 77 and maturity date of July 30, 2020.

a.What is the risk of the spot market for Alpha Limited? If the Finance Controller of Alpha Limited decides to retain the risk of the spot market, explain under which condition the revenue of Alpha Limited in term of Indian rupee will increase. If the Finance Controller of Alpha Limited decides to retain the risk of the spot market, explain under which condition the revenue of Alpha Limited in terms of Indian rupee will decline?

b.If the Finance Controller of Alpha Limited decides to hedge the foreign exchange risk of the spot market using Strategy A, explain what position in put options on US dollar Alpha Limited should acquire. Evaluate the strategy and explain the advantages and disadvantages of the strategy. Show full working.

c.If the Finance Controller of Alpha Limited decides to hedge the foreign exchange risk of the spot market using Strategy B, explain what position in call options on US dollar Alpha Limited should acquire. Evaluate the strategy and explain the advantages and disadvantages of the strategy. Show full working.

d.If the Finance Controller of Alpha Limited decides to hedge the foreign exchange risk of the spot market using Strategy C, explain what positions in put and call options on US dollar Alpha Limited should acquire. Evaluate the strategy and explain the advantages and disadvantages of the strategy. Show full working.

e.If the Finance Controller of Alpha Limited desires that Alpha Limited should receive at least Rs. 72 for every US dollar on July 30, 2020, explain which strategy you would recommend.