Lets consider the example of Coleman Co. in this weeks lecture. Please provide steps and analysis associated with your answers to the questions below.

1. If the forward rate is EUR/USD = 1.21 now, what is the cost of the forward hedging?
2. Assume now the annual U.S. interest rate is 7.5% and the annual euro interest rate is 4.5%. What is the cost of the money market hedging?
3. Assume now the call option has an exercise price of EUR/USD = 1.19 with a premium of $0.04. If the prediction of the spot rate in a year is as shown in the table below, what is the cost of the option hedging?
4. Which hedging technique is optimal for Coleman Co. now?
5. Should Coleman Co. use the optimal hedging technique to hedge payables?

Scenario	The spot rate in a year	Probability
1	1.17	40%
2	1.23	60%