Intel Inc. sold a batch of computer microchips to Lenovo Inc

Intel Inc. sold a batch of computer microchips to Lenovo Inc., a Chinese tech company, and
billed 100 million yuan (CNY) payable in 6 months. Intel is concerned about the dollar
proceeds from international sales and wants to control exchange rate risk. The current spot
rate is 6.76 yuan per dollar, and the 6-month forward rate is 6.89 yuan per dollar. A 6-month
CNY European put option quoted in American terms with a strike price of $0.1471 per yuan is priced at a premium of $0.0005 per yuan. Currently, 6-month interest rate is 2.0% (thus 4%
over 1 year) in the U.S., and 3.5% in China.

Question 1: Compute the guaranteed dollar proceeds from the Chinese sales if Intel decides to hedge using a forward contact.

Question 2: If Intel decides to hedge using money market instruments, what action does Intel need to take? What would be the guaranteed dollar proceeds from the Chinese sale in this case?

Question 3: If Intel decides to hedge using CNY put options, what would be the “expected”
dollar proceeds from the Chinese sale? Assume that Intel regards the current forward rate as an unbiased predictor of the future spot rate.