1-A-B USA-CO will receive 10,000,000 Pounds (P) in 288 days (= 80 yr) from a British customer. USA-co wants to hedge exchange rate risk on the future USS value when converting P to USS Spot rate today is $1.37 / P ANNUAL deposit (investing) rate is: U.K. = 2.75% : USA = 6.25% ANNUAL borrowing rate is: U.K. = 4.25%; USA - 8.4% 1-A) 18pts MONEY MARKET hedge amount for USA-CO 1-3-1-to-4 Continuation of USA-co problem from top of page for option hedge problem below CALL option is available with 288-days to maturity, with Strike price of $1.37 /P with a premium of $.028/P PUT option is available with 288-days to maturity with Strike price of $1.37 / P with a premium of $.024/P USA-co forecasted the +288-day future expected Spot Rate as follows: $1.355 /P 15% prob. $1.365/P 30% prob. $1.375 /P 40% prob. $1.385 /P 15% prob. (4 pts ea. row) Option Hedge