PLEASE ONLY ANSWER PART B WHICH IS HIGHLIGHTED

Suppose that the current EUR/GBP exchange rate is 0.86 per euro. The current 6 -month interest rates are: GBP 4\%, EUR 6\%. There are three 6-month forward contracts available, with the following exchange rates: a) You expect to incur an expense of 50,000 in six months. Can you identify any relevant risk in terms of the EUR/GBP exchange rate? Would you use any of the available forward contracts to hedge against this risk? Explain and provide an example: [8 marks] b) You expect to receive an inheritance of 50,000 in six months, and you expect the EUR/GBP exchange rate to remain at 0.86 per euro until then. Would you enter in any of the available contracts today? If so and assuming your expectation about the future exchange rate is correct, how much profit/loss would you make? [10 marks]