Singapore firm bought imported turbine from United States. The payment will be made for next three months. The amount of imports was $850,000. The chief financial officer of that company bought the call option to protect it import. The exercise or strike price is S$ 1.3750/$, the call option premium is S$0.005 /$.

a. If the future spot rate for next three months is S$1.3750/$. If the future spot rate is correctly predicted, what should the firm do?

b. If the future spot rate for next three months is S$1.425/$. If the future spot rate is correctly predicted, what should the firm do? c. What future spot rate is the firm indifferent between the call option and spot market?