Question 1: (30 pts) Suppose that the U.S. firm FIN340 Inc. buys construction equipment from the German firm XYZ at a price of 5 million. The equipment is to be delivered to the United States and paid for in one year. The current exchange rate is 0.89/S (0.89 S1). The current interest rate on one-year U.S Treasury bills is 4%, and the current interest rate on one-year German government bonds is 2%. On foreign exchange market, there is a one-year forward contract to exchange 0.85-$1. Question: We discussed in class several approaches to hedge against exchange-rate risk Explain and iustifv (with numbers) TWOapproach that helps U.S. firm FIN340 Inc. hedge against the risk. Question 2: (20pts) a) Suppose that Bank of America sells $30 million in Treasury bills to PNC Bank. Use T- accounts to show the effect of this transaction on the balance sheet of each bank. b) Suppose that Lena, who has an account at SunTrust Bank, writes a check for $100 to Jose, who has an account at National City Bank. Use T-accounts to show how the balance sheets of each bank will be affected after the check clears c) Suppose that National Bank of Guerneville has S35 million in checkable deposits, Commonwealth Bank has $42 million in checkable deposits, and the required reserve ratio for checkable deposits is 10%. If National Bank of Guerneville has S4 million in reserves and Commonwealth has $5 million in reserves, how much in excess reserves does each bank have