Chronos Time Pieces. Chronos Time Pieces of Boston exports watches to many countries, selling in local currencies to stores and distributors. Chronos prides itself on being financially onservative. At least 70% of each individual transaction exposure is hedged, mostly in the forward market, but occasionally with options. Chronos' foreign exchange policy is such that the 70% edge may be increased up to a 120% hedge if devaluation or depreciation appears imminent. Chronos has just shipped to its major North American distributor. It has issued a 90 -day invoice to its puyer for 1,740,000. The current spot rate is $1.2218/, the 90 -day forward rate is $1.2278/. Chronos' treasurer, Manny Hernandez, has a very good track record in predicting exchange rate novements. He currently believes the euro will weaken against the dollar in the coming 90 to 120 days, possibly to around $1.1532/. . Evaluate the hedging alternatives for Chronos if Manny is right (Case 1: $1.1532/ ) and if Manny is wrong (Case 2:$1.2525/ ). What do you recommend? What does it mean to hedge 120% of a transaction exposure? What would be considered the most conservative transaction exposure management policy by a firm? How does Chronos compare