Question $1$

Suppose the current spot rate is $TL28\mathrm{.}00/$ and the $1-$year forward rate is $TL\frac{29\mathrm{.}90}{}.$ The interest rates for $TL$ and euros are $12\%$ and $5\%$ respectively. Your company is to

receive $2,500,000$ in one year. You want to hedge your transaction exposure as a Turkish company.

a$.$ Form a forward market hedge to protect yourself against FX risk.

b$.$ Form a money market hedge to protect yourself against FX risk.

c$.$ Form an option market hedge to protect yourself against FX risk if at an exercise price of TL$29\mathrm{.}90$ per euro, premiums of $1-$year call and put options are both

TL$1,25.$