Assume the current spot U.S. dollarU.K. pound exchange rate is 1 = $ 1.2500 A U.S. exporter has a contract to sell 4 million of goods at the end of the year that is, the exporter will receive a fixed amount of 4 million at the end of the year from selling the goods at that time. The exporter is concerned that the pound may depreciate against the dollar between now and then.

(a) What should the exporter do now ?

(b) What is the outcome to the exporter if the exchange rate at the end of the year is 1 = $ 1.5000 ?