3. A) An option contract is a superior derivative contract than a forward contract Explain with example.

B) Compute the annualized forward discount or premium, State whether your answer is a discount or premium.

I. Mexican peso 30-day forward rate is $.102 and spot rate is $.10.

II. British Pound 120-day forward rate is $1.672 and spot rate is $1.681.

C) Under each condition stated below what should be the steps taken by each individual at maturity to get the maximum benefit (Assume premium on option contract is zero):

Situation	On maturity date
A firm buys a put option of US $ to hedge its open position	Strike price > Spot rate of US$
An international bidder buys a call option on C $, afterwards his bid was rejected	Strike price > Spot rate of C$
A speculator purchases a future contract to sell US $	Exercise price >Spot rate of US $

*Don't do it on excel. Do it on a paper.* Thanks