Malibu, Inc., is a U$.$S$.$ company that imports British goods. It plans to use call options to hedge payables of $100,000$ pounds in $90$ days. Three call options are available that have an expiration date $90$ days from now. Fill in the number of dollars needed to pay for the payables $($including the option premium paid$)$ for each option available under each possible scenario in the following table. Round your answers to the nearest dollar.

SCENARIO SPOT RATE OF

POUND $90$ DAYS

FROM NOW EXERCISE

PRICE $=$ $$1\mathrm{.}73$;

PREMIUM $=$ $$0\mathrm{.}07$ EXERCISE

PRICE $=$ $$1\mathrm{.}75$;

PREMIUM $=$ $$0\mathrm{.}05$ EXERCISE

PRICE $=$ $$1\mathrm{.}80$;

PREMIUM $=$ $$0\mathrm{.}02$

$1$ $$1\mathrm{.}66$ $

$

$

$2$ $$1\mathrm{.}71$ $

$

$

$3$ $$1\mathrm{.}76$ $

$

$

$4$ $$1\mathrm{.}81$ $

$

$

$5$ $$1\mathrm{.}86$ $

$

$

If each of the five scenarios had an equal probability of occurrence, which option would you choose? Explain.

The option with the $

$-$Select$-0\mathrm{.}02,0\mathrm{.}05,0\mathrm{.}07$

premium is slightly better than the other two options, on average.