I guess I would call this more of a context / perspective question.
#4 deals with Zhang’s and Takahashi’s market view of 50/50 chance of appreciation/depreciation. I got the right answer, but I didn’t understand a few of the comments in the explanation, and I think it’s because I was not correctly interpreting their situation.
Would this be correct to say: They do not currently have an exposure to the Philippines Peso that they are trying to hedge; they are merely wanting to place an option bet that takes advantage of what they believe is going to happen to the PHP/USD exchange rate.