AutoFast is a leading supplier of automotive machines located in German. The company has sent the invoice to one of Australian company which purchased the machines that costs AUD 200,000 with two months ahead on the delivery date. AutoFast may consider purchasing two put options contracts (because each option contract represents 100,000 Australian dollar) as a hedging strategy against the movement of Australian dollar. The current AUD spot rate is $0.69. The first put option contract requires a premium of $0.004, and the exercise price is 5 percent above the spot rate. Meanwhile, an alternative put options is available with two months maturity, with an exercise price of 10 percent above the spot rate, and the premium is $0.006. On the other hand, AutoFast may choose futures hedge as an alternative hedge instrument. The futures price of the contract for the two months maturity is $0.712. i. If Autofast hedge either using first option or second option contract, should it use the first or second put option contract? Describe the trade-off based on exercise price and premium price between the two option contracts. (3 marks) ii. Assume that the firm shares the market consensus of the expected future spot rate equals to futures price of $0.712. Given this expectation, calculate the payoff as the results of the following strategy: - a) Futures hedge (2 mark) b) Option hedge (there are three possible outcomes of using option contracts) (6 marks)