Suppose you are in the business of importing and exporting in India. Your associated cash flows for import are CNY 1,250,000 in 6 months and for export are CNY 1,750,000 in 4months. You want to hedge your transaction exposure. You explore various alternatives and gather the following information:

Interest Rates are as follows:

i_INDIA = 7.63% per year i_CHINA=11.25% per year

Foreign Exchange rates are as follows

FX Rate: (INR/CNY)
Today(Spot)	1-Month	2-Month	3-Month	4-Month	6-Month	1-year
1.3025	1.2986	1.2948	1.2910	1.2873	1.2801	1.2601

Option Information

Call Options		Put Options
4-month Option	6-Month options	4-month options	6-month options
FX Rate: (INR/CNY)	FX Rate: (INR/CNY)	FX Rate: (INR/CNY)	FX Rate: (INR/CNY)
Premium:0.0085 Spot rate: 1.3025 Exercise Price: 1.2910 St(1):1.3150 St(1): 1.2850	Premium: 0.0065 Spot rate: 1.3025 Strike Price: 1.2865 St(1):1.3250 St(1): 1.2650	Premium: 0.0085 Spot rate: 1.3025 Strike Price: 1.2910 St(1): 1.3150 St(1): 1.2850	Premium: 0.0065 Spot rate: 1.3025 Exercise Price: 1.2865 St(1):.3250 St(1): 1.2650

Futures Information:

FX Rate: (INR/CNY)
Contract Month	Spot Rate	Futures Rate
Today (April Contract)	1.3025	1.2825
3-Months Away (July Contract)	1.2910	1.2910
4-months away (August Contract)	1.2873	1.2873
6-Months away (October	1.2801	1.2801

Conduct a forward hedge for transaction exposure associated with export explaining the process and showing your net CF after hedging. Assuming in the future when your receive cash flows, spot rate at that time is [St(1]) how do you feel about your hedging decision?