DKNY owes Ptas 70 million in 30 days for a recent shipment of Spanish textiles.

It faces the following interest and exchange rates

spot rate _ ptas 130/$

forward rate = ptas 131 /$

30-day us intrest rate (annualized)=7.5%

30-day put option on $ (strike price = ptas 129/$ = 1% premium

30-day ptas intrest rate (annualized)=15%

30-day call option on $ (strike price = ptas 131/$ = 3%

from the above setiation answer the following :

1- which company faces a foreign exchange expsure

2-what is the expusre called?

3- what are the available alternitives to manage that exposure (show the calculations)

4-what is the best alternative and why?

5- if dkny expect the 30-day spot rate to be ptas 134/$ , should it hedge the payable? ( justify your answer )(hint consider other factors)