4. As a US importer, we have the option of hedging with forwards, options, or not hedging. The size of the transaction is 6.04 million British Pounds. There are 62,500 pounds in 1 option contract.

Now End

Spot 1.240-41 $/L 1.100-01 $/L

Forward 1.230-31 $/L

Call .04$ 0

Put .03$ .14

a) How much would you receive/pay if you had hedged with forwards?

b) How much would you receive/pay if you had hedged with options?