S*A. We are Bechtel, a private US construction firm. We bid to develop the airport and thesurrounding area for Thailand. We are not sure whether the Thai transportation authorities willgrant us the business, but we hope they will. If we are awarded the contract, for which we bid $ 1billion, we shall need to buy Thai materials and labor for 2 years. Assume that the purchases weneed to make are half in one year and half the year, after the next one. The project will becompleted in three years from the present. We expect the Thai bhat will revalue in the next 2years. We have two choices. One is to hedge, paying the labor and materials in the next twoyears, and the other is to leave an open position.The data we have are the following. The Spot ER, forward ER now, forward rate in one year andspot rate in one year are 24, 30, 28 and 27 bhat per $. The call and put option premia on bhat anddollars for exercise prices of 30 bhat per dollar and 25 bhat per $ are 2% and 1% of the value.The time period of the options is two years. Analyze what the best solution is. Show it 1)mathematically and 2) verbally.Why may we perhaps not hedge?*B. We have 100 million South African rand that is payable in one year (we have to pay it to aSouth African company.) Assume the spot exchange rate is 10.05 rand equal one US dollar.Also, assume that the forward exchange rate is 10 rand equal one dollar. We expect the futurespot rate to be 9.8 rand per $1. Furthermore, either calls or puts cost .01(1%). The exercise priceof the options is 10 rand per dollar and 11 rand per dollar for both types of options.Expound on how to hedge the aforementioned exposure. Moreover, the market expectation isthat the rand will appreciate against the dollar. We want to implement transactions exposurehedging.Ascertain that we use 1) a forward contract, or an options approach. C. We have the same information as above. In this case, we want to hedge via risk sharing, orleading and lagging or currency swaps.*D. SMU Corporation has future receivables on NZ$4,000,000 in one year. It must decidewhether to use options or a money market hedge to hedge this position. Determine which hedgeis most appropriate and compare it to an unhedged strategy.Spot rate of NZ$ $0.54One-year call option Exercise price =$0.50 premium = $0.07One-year put option Exercise price = $0.52 premium = $0.03One-year Forward rate $0.51US New ZealandOne-year interest rates 9% 6%