Q6, Q7 and Q8 are linked. They all relate to Lara, the finance Director of General Electric (GE).

Q6: Your name is Lara and you are the finance Director of General Electric (GE). You need, on behalf of GE, to buy 22 mio Australian dollars (AUD) and sell British pounds (GBP) for delivery 3 months from now (the purchase of AUD is in connection with payment to an Australian mining company for iron ore).

You telephone three banks (Citibank, Bank of America, and JP Morgan) ) and ask them for 3 months forward exchange rates for the number of Australian dollars per British pound. Their rates are:

Citibank AUD/GBP 1.8705 -- 1.8710 Bank of America AUD/GBP 1.8703 -- 1.8708 JP Morgan AUD/GBP 1.8706 -- 1.8711.

Q6: Assuming you trade in the forward contract, at what rate (expressed -- again -- as AUD/GBP) should you trade?

Q7: Assuming the correct answer to the previous question (i.e., Q6 -- read it again), how many GBP does GE sell (in 3 months from now) in exchange for the 22 mio AUD. Give your answer in GBP to the nearest GBP.

Q8: This question follows on from Q6 and Q7 and asks the question: Suppose you (i.e., Lara) did NOT -- repeat NOT -- trade in the forward contract (as presumed above). Instead, you left your requirement to buy 22 mio AUD unhedged. Suppose that, 3 months from now, the spot exchange rate for the number of AUD per GBP being quoted by Barclays bank turns out to be 1.6500 -- 1.6505 (bid -- ask). You still need to buy 22 mio AUD. Assuming you trade with Barclays, how many GBP does GE sell in exchange for the 22 mio AUD. Give your answer in GBP to the nearest GBP.