Suppose Jin Corporation imported an engine to British Car Corporation and has 5 million payable in one year. Market information are given as follows:

• Interest_US: 6.00% per annum
• Interest_UK: 6.5% per annum
• Spot exchange rate: $1.80/
• Forward exchange rate: $1.75/ (1-year maturity)
• Exercise price (Strike price): $1.80/ (1-year expiration)
• Option premium: $0.018/

1. If we follow appropriate steps to hedge against the exchange fluctuation by using forward contract, how much do we have to spend in $ to make the 5 million payment?
   1. $2,777,778
   2. $2,857,143
   3. $8,750,000
   4. $9,000,000
2. If we follow appropriate steps to hedge against the exchange fluctuation by using money market, how much do we have to borrow if any?
   1. We borrow $8,450,704.8 from the U.S. bank.
   2. We borrow 4,694,836 from the British bank.
   3. We dont borrow.
3. If we follow appropriate steps to hedge against the exchange fluctuation by using money market,, how much will we have from lending investment after 1 year?
   1. We will have $ 8,957,747.
   2. We will have $ 9,000,000.
   3. We will have 4,976,526.
   4. We will have 5,000,000