Question 3 (20 marks) Assume that Jarret Co. (an Australian company) expects to receive 1 million euros in 1 year. The existing spot rate of the euro is $1.6240. The 1-year forward rate of the euro is $1.6490. Jarret expects the spot rate of the euro to be $1.6600 in 1 year. Assume that 1-year put options on euros are available, with an exercise price of $1.65 and a premium of $.04 per unit. Assume the following money market rates: AUSTRALIA EUROZONE Deposit rate 1% 0% Borrowing rate 3% 2% a. Determine the dollar cash flows to be received if Jarret uses a money market hedge. (Assume Jarret does not have any cash on hand.) (6 marks) b. Determine the dollar cash flows to be received if Jarret uses a forward market hedge. (5 marks) c. Determine the dollar cash flows to be received if Jarret uses a put option hedge. (5 marks) d. Which hedging method is best? Also consider the possibility of not hedging? (4 marks)