ABC Textiles Limited places an order to buy textile machinery with an American company. As per the agreement ABC Textiles Limited will be paying US $ 200000 after 180 days. As the fluctuation in the spot rate of the US d

ABC Textiles Limited places an order to buy textile machinery with an American company. As per the agreement ABC Textiles Limited will be paying US $ 200000 after 180 days. As the fluctuation in the spot rate of the US dollar over next 180 days will impact the rupee cost of import, the Board of ABC Textiles Limited asks its finance manager to collect data from the currency forward market, money market, currency option market etc. The board also asked a consultant to assess various possible dollar spot rates after six months. The various findings are as follows: (a) Possible spot rate of dollar after six months, as estimated by the consultant, is ₹ 47.25, ₹ 47.75, ₹ 48, ₹ 48.50, ₹ 48.90. (b) Spot rate of dollar as of today is ₹ 48/US $. (c) 180 day forward rate of dollar as of today is ₹ 48.48/US $. (d) Interest rates are as follows: India USA For 180 days deposit rate (per annum) 7.50% 1.50% For 180 days borrowing rate (per annum) 8.00% 2.00% (e) A call option on the dollar, which expires in 180 days, has an exercise price of ₹ 48/US $ and premium ₹ 0.52/US $. (f) A put option on dollar, which expires in 180 days, has an exercise of ₹ 48/US $ and premium of ₹ 0.04/US $. Carry out a comparative analysis of the various outcomes (rupee cost of import) under the alternatives of (iv) Option hedging.