Question 1 Finham Limited UK has just signed a contract for the sale of a new manufacturing equipment for (400,000 to an Italian company. The receipt is expected in six months' time. The company's finance director is considering using either 1) a forward contract or 2) an OTC option to hedge this exposure. Current market rates and quotes are as follows: Spot E1.14/f 6 Month Forward E1.16/f An option to sell (400,000 in six months' time at an exercise price of E1.14/f is available from their bank at a premium of t0.02 per E Required a) In each case compare the results if in six months' time the exchange rate has i) Moved to E1.10/f [15 marks] ii) Moved to E1.18/f [15 marks] b) Calculate the exchange rate at which it would be beneficial to use the option rather than the forward. Explain why this information would be of use to a company. [5 marks] in how the con [Total: 35 marks]