Nikken Microsystems (B). Assume that Nikken Microsystems prefers to receive British pounds rather than euros for the trade transaction described in Problem 1. It is considering two alternatives: (1) sell the acceptance for euros at once and convert the euros immediately to pounds at the cross spot rate of exchange of

£0.72/€ or (2) hold the euro acceptance until maturity but at the start sell the expected euro proceeds forward for dollars at the 3-month forward rate of £0.75/€.

a. What are the British pound net proceeds received at once from the discounted trade acceptance in alternative 1?

b. What are the pound net proceeds received in three months in alternative 2?

c. What is the break-even investment rate that would equalize the net pound proceeds from both alternatives?

d. Which alternative should Nikken Microsystems choose?