suppose that a us insurance company issued 10 million of one year zero coupon gic denominated in british pounds at a rate of 5%.the insurance company holds no pound-denominated assets and has neither bought nor sold pounds in the market

strike price is $1.50/pound

spot price is $1.55/pound size of option contract is 31250pounds

d)calculate the number of contracts required for fully hedging the firms foreign exchange risk

e)if the june relevant option premium is $0.32/pound calculate the total hedging cost

f)draw a graph depicting the payoff of the option the balance sheet exposure and the net payoff of the strategy at expiration.Calculate the value of the latter given that the initial spot rate is $1.47/pound and discuss