Q1. (a) Amcam Plc. is a producer, distributor and seller of high quality protein research tools. Its headquarter is located in Cambridge, U.K., with twelve additional locations across the U.K., the U.S, and Asia. Presently, the company just received two receivables from its customers, amounting Pound 600,000 from its U.S. customer, and Pound 500,000 from its Korean customer, respectively. Marvick Hughes, who is the chief financial officer of Amcam, considers gaining some risk less profit by investing a lump sum amount of these two payments into either money market in the U.S. and Korea, due to the lower deposit rate in the U.K. However, he concerns about the exchange rate risk will offset the profit gained in money market. Hence, he intends to invest in forward currency contract to hedge against the exchange rate risk. There are two forward currency contracts offered by HSBA Bank, an investment bank in the U.K. The details of the forward currency contracts are provided as follows:- Forward contract Current spot rate 180-day forward rate XYZ (Pound/USD) Pound 0.79/USD Pound 0.77/USD ABC (Pound/KRW) Pound 0.00067/KRW Pound 0.00066/KRW Other information is as follow: Interest rate in the U.K Interest rate in the U.S. Interest rate in Korea 2%p.a. 5%p.a. 8%p.a. As a chief financial officer, advice the company whether should the company invest in forward contract XYZ or forward contract ABC and calculate the arbitrage profit of Amcam based on your decision. (14 marks)