An investment manager hedges a portfolio of UK government bonds with a 6-month forward contract. The current spot rate is 1.64:S1 and the 180-day forward rate is 1.61:$1. At the end of the 6-month period, the Bunds have risen in value by 3.75 percent (in pound sterling terms), and the spot rate is now 1.46:S1. a. If the bond earn interest at the annual rate of 5 percent, paid semi-annually, what is the investment manager's total dollar return on the hedged bonds? (3 marks) b. What would the return on the bonds have been without hedging? (3 marks) An investment manager hedges a portfolio of UK government bonds with a 6-month forward contract. The current spot rate is 1.64:S1 and the 180-day forward rate is 1.61:$1. At the end of the 6-month period, the Bunds have risen in value by 3.75 percent (in pound sterling terms), and the spot rate is now 1.46:S1. a. If the bond earn interest at the annual rate of 5 percent, paid semi-annually, what is the investment manager's total dollar return on the hedged bonds? (3 marks) b. What would the return on the bonds have been without hedging