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Sir in part a (options), we have a receipt of $ so we purchase € call options.
In the second strike price choice 1.38 $/€ we get 115.9 contracts, the examiner has rounded it down to 115 and hedged the under-hedged amount at the forward rate for selling dollars as we will have $162,500 still left to be converted.
Can I round properly, round up to 116, and then hedge the over-hedged amount at the forward rate for buying dollars, since we are coming short of $10,000 for the option exercise?
Also sir part b in BPP kit (or part c in marking scheme), why is the investment amount converted using the PPP expected forward rate but all the cash inflows from the project are converted at the IRP expected forward rate?
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