It is 1 April and XYZ plc has obligation to pay $8 million on the 30th June. The current spot rate is $/ 1.5340 and XYZ expects that this rate will move in their favour. They have purchased from the bank an option to buy $8 million on 30 June at an exercise price of $/ 1.5845, and the bank has charged a premium of 50,000.

Required

Calculate the outcome and effective rate on 30 June if the spot rate on that date is:

(a) $/ 1.5180

(b) $/ 1.6153