Snell Gmbh is a German based retailer of parts for the automotive industry. It has been invoiced by an American company for USD$6.2m that is payable in six months' time. To manage the exchange risk involved in the transaction, the company is considering the use of a forward exchange contract. The local bank in Germany quotes the following exchange rates for the USD$ / Sell Buy Spot 1.13 1.15 3 months forward 1.16 1.18 6 months forward 1.18 1.20 You are required to: a. Calculate the proceeds which Snell Gmbh can expect to pay if it decides to enter into a six-month forward exchange contract. Discuss the reasons why a company would enter into such a contract. (26 marks) b. Explain the Interest Rate Parity theory when a US and German company are trading with each other. (24 marks) c. Differentiate between a forward exchange contract and an option when a US and German firm are trading with each other. (10 marks)