Continue to suppose that PPP holds between the USD and THB and that PQR will owe THB 12 million in one year. Suppose that PQR had hedged their exposure with the purchase of Call Options with an expiration date of 1 year. The Call Options had an exercise price of USD .036 and a Call Premium of USD .0004. In one year, PQR would -

Answer options:

1. Exercise the options and pay a net price of USD .032 pre THB

2. Allow the options to expire and pay a net price of USD .036266 per THB

3. Exercise the options and pay a net price of USD .0364 per THB

Please, explain..