Required:

i$)$ Determine the total cost in dollars of hedging the payable using a forward

contract.

ii$)$ Determine the maximum cost of hedging with an option contract.

iii$)$ On axes representing future exchange rates $($ x $-$axis$)$ and total costs $($ y $-$axis$).$ Show

the graphs representing following strategies adopted by Origine

a$)$ A do$-$nothing strategy

b$)$ Forward contract hedge strategy.

c$)$ An option contract hedge strategy.

marks$)$