Suppose a U.S company has to pay 5million after 3 months. To

hedge this the importer buys a call options on the pounds, and the option

premium is $0.0220/, the strike price K = $1.50/

(a) What is the cost incurred today?

(b) What is the ceiling that the importer has set on the price of the pounds?

(c) What is the actual amount that the importer will pay if the spot rate at

the end of 3 months is $1.46/? How will your answer change if the spot

rate becomes $1.55/