.

28. To hedge with a money market instrument, what would be the actions taken?

a. Borrow the PV of the receivable at the US interest rate, exchange dollars for pounds and invest the pounds at the UK interest rate.

b. Borrow the pound receivable at the US interest rate and invest it at the UK interest rate, exchange the pound for dollars.

c. Borrow the PV of the pound receivable at the UK interest rate, exchange pounds for dollars at the current spot rate and invest the dollars at the US interest rate.

d. Lend dollars at the US interest rate and exchange dollars for pounds in three months

(The guaranteed dollar proceeds using a forward contract is $1,363,326.52)

The West Virginia coal coalition sold four cargo shipments to India to assist with energy requirements in rebuilding Nepal post the Spring 2015 earthquake. The first contract required a 2 million pound payment due in three months. Current spot exchange rate: 3-month forward exchange rate : 3-month put premium on UK pounds: 3-month put option on UK pounds: Current 3-month U.S. interest rate: Current 3-month U.K. interest rate: 1.2788 / $ 1.4670 / $ $ 0.03 / $ 0.75 / 3.1 % 4.2 % The West Virginia coal coalition sold four cargo shipments to India to assist with energy requirements in rebuilding Nepal post the Spring 2015 earthquake. The first contract required a 2 million pound payment due in three months. Current spot exchange rate: 3-month forward exchange rate : 3-month put premium on UK pounds: 3-month put option on UK pounds: Current 3-month U.S. interest rate: Current 3-month U.K. interest rate: 1.2788 / $ 1.4670 / $ $ 0.03 / $ 0.75 / 3.1 % 4.2 %