Suppose that Mullen Co, a U.S.-based MNC, knows that it will need 100,000 pounds in one year in order to purchase supplies. It is considering a currency call option to hedge this payable. Currency call options on the pound with expiration dates in one year currently have an exercise price of $1.20 and a premium of $0.05. On the following graph, use the blue points (circle symbols) to plot the contingency graph for hedging this payable with a call option. Plot the points from left to right in the order you would like them to appear. Line segments will connect automatically. Plot the 3 blue points for the following pound spot rates: $1.15, $1.20, $1.26. Note: The vertical axis measures dollar cash outflows from the hedge, which includes the price paid for pounds and any option premium ? 1.28 1.27 1.26 + Contingency Graph 1.25 + 1.24 + 1.23 + Dollar Cash Outflows from Hedge (Dollars per Pound) 1.22+ 1.21 + 1.20+ 1.19 + 1.18+ 1.17 + 1.16+ 1.15+++ 1.15 1.16 1.17 1.18 1.10 120 121 122 123 124 125 Pound Spot Rate in One Year (Dollars per Pound)