Q.5 AMRON Corporation Ltd., a US based Company will need to pay 200,000 in 180 Days. T It considers using, 1. A Forward hedge 2. An option hedge 3. A Money Market hedge 4. No hedge / open position Its financial analysists have developed the following information, which can be used to assess the alternative approach to hedging. Spot rate of pound as of today 180 days forward rate of pound = $1.50 = $1.47 Interest rate per annum are as follows: 180 days deposit rate 180 days borrowing rate UK 4.5% 5.0% US 4.5% 5.5% A call on pound that expires in 180 days has an exercise price of $ 1.48 and a premium of $0.03. Fresno corporation forecasted the future spot rate in 180 days as follows: 1 2 3 Possible outcome $ 1.43 S 1.46 $ 1.52 Probability 20% 70% 10% Show calculation and suggest best alternative to the company