On February 15, 1996, a French exporter expects export proceeds of 1 million pounds sterling to be paid on August 15, 1996.

Financing of the export transaction can be arranged in three ways: (a)

through the French banking system at a yearly interest rate of 9 %,

(b) through the British banking system at a yearly interest rate of 12%, and

(c) through the Eurodollar market at a yearly interest rate of 6 % .

On February 15, 1992, exchange rates are quoted as follows:

SFF,£(O) = 10 (French franc price of one pound sterling for immediate delivery), SFF,S(O) = 6 (French franc price of one U.S. dollar for immediate delivery), FFF,£(180) = 9.60 (French franc price of one pound sterling for delivery in 180 days), and FFF,S(180) = 6.20 (French franc price of one dollar for delivery in 180 days).

How should the transaction be flnanced?