3. A British company will pay 2 million Australian dollars for imports from Australia in six months. The current price for Australian dollars is 0.5. The corresponding six-month forward price is 0.4969; entering into this agreement requires a 0.01 deposit, which is refunded with interest at maturity using the British interest rate. The British continuously compounded rate of interest is 0.5%. The price of a six-month European call option on Australian dollars with a strike price of 0.49 is 0.0075. (a) Determine the Australian continuously compounded rate. [2 marks] Turn over (b) Outline three ways the British company can hedge its liability and calculate the cost of implementation in each case. [3 marks) Suppose the exchange rate in six months time is 0.48. (c) Calculate the profit or loss (in pounds) for each strategy at maturity; you must consider the time-value of money. [3 marks) (d) Compare and contrast these different hedging strategies. Which performed best, explain [2 marks) why? Total: 10 marks)