Tulip Inc. is an American manufacturing company who has just sold an equipment from a Mexican company for 10,000,000 Mexican Pesos, payable in three months. Three-month call options on 10,000,000 Mexican pesos (MXN) at an exercise price of 18 pesos per dollar are available from Banco Santander Mexico at a premium of 3.2%. Three-month put options on 10,000,000 pesos at an exercise price of 18.00 pesos per dollar are available at a premium of 3,8%. Compare and contrast alternative ways that Tulip might hedge its foreign exchange transaction exposure What is your recommendation? Assumptions Values Shipment to Mexico, Pesos Tulip's cost of capital (WACC) 10,000,000 13% 17.00 Spot exchange rate, MXN/$ Three-month forward rate, MXN/$ 20.20 Options on Mexican pesos: Call Option Put Option 18.00 18.00 Strike price, MXN/$ Option premium (percent) 3.200% 3.800% United States Mexico 4.000% 9.000% Three-month interest rate for borrowing (per annum) Three-month interest rate for investing (per annum) 5.000% 8.000%