1) RKT has a deal of credit sales to a customer in Australia amounting to AUD750,000, payable in 3-month time (December 2021).

Annual 3 months' interest rates

UK	6%
AUSTRALIA	3%
EUROPE	2.5%

Assume the company borrow and lend at the same rate.

The mid-market foreign exchange rates are as follow:

	SPOT	DECEMBER	MARCH
AUD TO 1	2.3834	2.3688	2.4000

The AUD to 1 Currency futures (Sterling 62,500 contracts)

	DECEMBER FUTURE	MARCH FUTURE
NOW	2.3500	2.4000
IN DECEMBER	2.3900	2.5000
IN MARCH	2.5555	2.6000

Foreign currency option (Sterling 31,250 contracts, in AUD per )

	CALL		PUT
Strike Price (AUD to 1)	December	March	December	March
2.40	0.07	0.08	0.06	0.04

Besides, the current Euro to 1 exchange rate is 1.667. RKT's finance director, Mr. Mayer, has some forecasts of Euro exchange rates in two years-time from three prominent banks.

Euro/ two-year forecasts

Cadbank	1.452
Dodgebank	1.514
Kogibank	1.782

A non-executive director of RKT, Mrs. Douglas, has suggested that to forecast future exchange rates, the interest rate differential between countries should be used. She expresses that based on the current short-term interest rates in the UK and in the Europe (the annual 3 months' interest rates given in the table above), the exchange rate in two years' time will be Euro 1.747/.

Required

(a) Calculate the forward contracts.