Dell is selling 20,000 Units in Europe at an average price of 1,700 per unit. Both the spot and forward exchange rates are $1.20/. The cost of each unit in dollars is $1,500 per unit. The elasticity of demand for Dell computers in Europe is e =1.5

1. Reconsider a depreciation of Euro (relative to US dollar) from $1.20/ to $1.08/. Now assume passthrough = 0.5. What is Dell's total profit in $?

2. Now consider a depreciation of Euro (relative to US dollar) from $1.20/ to $1.08/. and assume ZERO passthrough What is Dell's dollar profit exposure and how to hedge is using forward?

3. What is the delta for Dell's dollar profit assuming zero pass through?

4.What are respectively the delta and exposure for Dell's dollar profit when passthrough = 0.5?