Exchange rate is currently $1.85 US per 1 British pound. Interest rate is 3% in the US and 4% in the UK. A bank is long a futures contract on 1,000,000 pounds with F= $1.8 million in one year.

Write the expression for the present value of the banks short futures position, as a function of current spot exchange rate S

		Value = 1,000,000 (S (1.04/1.03) 1.8) / 1.03
		Value = 1,000,000 (S (1.03/1.04) 1.8) / 1.03
		Value = 1,000,000 (1.8 - S (1.03/1.04)) / 1.03
		Value = 1,000,000 (1.8 - S (1.04/1.03)) / 1.03