Consider the following Foreign Exchange Swap. Your company currently has 500,000 in a U.K. bank account. You have a temporary financing need of $600,000 for one year. The current spot rate is S ($/) = 1.2 $/. Suppose that the interest rate in USD is i$ = 2% per year and the interest rate in pounds is i= 4% per year. Based on the FX swap agreement you will sell 500,000 for $600,000 at the current spot rate to the bank and determine a forward rate at which the money will be swapped. Based on the given information the conditions of the FX swap can be calculated as follows:

a. In one year you will pay back about $588,000 to the bank at an agreed upon future swap rate of about F($/) = 1.18, and the bank will deposit 500,000 in your account.

b. In one year you will pay back about $612,000 to the bank at an agreed upon future swap rate of about F($/) = 1.22, and the bank will deposit 500,000 in your account.

c. In one year you will pay back about $620,000 to the bank at an agreed upon future swap rate of about F($/) = 1.18, and the bank will deposit 508,475 in your account.