14. (2pts) If the inflation rate in the UK is higher than the inflation rate in the US by 3%. According to the relative PPP theory, what is your prediction of the British pound FX rate in one year if the current spot rate is $120/BP (Calculate future spot rate in one year) A $1.220/bp. Appreciation of bp B. $1.342/bp. Appreciation of bp C. $1.160/bp, Depreciation of bp D$1.164/bp, Depreciation of bp 15. (2pts) The price for Big Mac in the US is $4.00 and the price in EU area is Euro 3.2. Calculate the PPP rate based on these Big Mac prices (direct quotation) If the actual market FX rate is $1.12/euro, what is your evaluation about the value of euro against USS in the market? And what would be your prediction about the euro? A $0.85/euro, Depreciation of euro B. $0.85/euro; Depreciation of euro C. $1.25/euro; Appreciation of euro D $124/euro, Appreciation of euro #16 #18 A US company has British pound 2 million payables in 90 days. The company decide to use option contracts to manage its FX risk from this international transaction and has the following information about the option contracts O A 90 day call option contract for BP 2 million with strike rate = $174/BP, call premium per British pound is $0 02 A 90 day put option contract for BP 2 million with strike rate= $1.75/BP, put premium per British pound is $0.02 16. (2pts) Which option contract the company need to purchase? A. Call option B. Put option