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 conservative. At least$70\%$ of each individual transaction exposure is$$ hedged, mostly in the forward$$ market, but occasionally with options.$$ Chronos' foreign exchange policy is such that the$70\%$ hedge may be increased up to a$120\%$ hedge if devaluation or depreciation appears imminent. Chronos has just shipped to its major North American distributor. It has issued a$90-$day invoice to its buyer for euro$1$ comma $730$ comma $0001,730,000.$ The current spot rate is $$$$1\mathrm{.}22241\mathrm{.}2224/$euro$,$ the$90-$day forward rate is $$$$1\mathrm{.}22771\mathrm{.}2277/$euro$.$Chronos$\text{'}$ treasurer, Manny$$ Hernandez, has a very good track record in predicting exchange rate movements. He currently believes the euro will weaken against the dollar in the coming $90$ to $120$ days, possibly to around $$$$1\mathrm{.}15861\mathrm{.}1586/$euro$.$

a$.$ Evaluate the hedging alternatives for Chronos if Manny is right$($Case $1$: $$$$1\mathrm{.}15861\mathrm{.}1586/$euro$)$ and if Manny is wrong$($Case $2$: $ $1\mathrm{.}2507$ divided by euro$$1\mathrm{.}2507/).$ What do you$$ recommend?

b$.$ What does it mean to hedge$120\%$ of a transaction$$ exposure?

c$.$ What would be considered the most conservative transaction exposure management policy by a$$ firm? How does Chronos$$ compare?