A US firm is going to pay GBP800,000 in 3 months. The firm is considering to buy a European call or a put option on the GBP with strike price GBP/USD = 1.2 and 3 months to maturity. The premiums are c = 0.6 dollars per pound and p = 0.7 dollars per pound.

a) Should the firm use a call or a put on the GBP?

b) Calculate the total amount of dollars that the US firm needs to pay GBP800,000 in 3 months when using the appropriate option in the following cases for the exchange rate GBP/USD in 3 months: 0.8, 0.9, 1, 1.2, 1.3 and 1.4.