SIC Insurance Company bought reinsurance product from a foreign reinsurance company in UK. The cost of the reinsurance product is £1,000,000 payable in 1 year time. Assume that the spot exchange rate is GHS5/£, and the 1 year forward rate is GHS5.5/£. 

a). Indicate how SIC can use forward market hedge to manage this payable. 

b). Calculate the amount of GHS that SIC will need to undertake the forward market hedge. 

c). Calculate the gain or loss under the forward market hedge if the spot rate at maturity turns out to be GHS6/£. 

d). Suppose SIC decides to use an option contract to hedge this transaction. Assuming the spot rate at maturity is GHS6.7/£, the premium is GHS0.001/f and the strike price is GHS5.5/£. What option can it use? What is the payoff?rn