Suppose that the U.S. Boeing Corporation has just exported a Boeing 747 to British Airways and billed 10 million, payable in one year. The Assistant Treasurer at the Corporation oversees finding ways to hedge its foreign currency risk of British pounds. Lately, the pounds are very volatile against U.S. dollars. The Assistant Treasurer just finished collecting the spot, forward, and currency options quotes from the Bloomberg terminal, which are as follows:

Spot exchange rate ($/): 1.50

Forward exchange rate ($/) 1 year: 1.46

U.S. interest rate (p.a.): 6.10% bid, 6.12% ask

U.K. interest rate (p.a.): 8.87% bid, 9.00% ask

1. For each of the five possible exchange rate scenarios for dollar-pound, please provide the calculations and answers for:
   1. Forward Market Hedge (that is, the Unhedged Position, Hedged Position and Gains/Losses from Hedge)
   2. Money Markets Hedge
   3. Options Market Hedge (that is, Exercise Decision, Gross Dollar Proceeds, Option Cost and Net Dollar Proceeds)

2. Determine what the best strategy would be for the corporation to consider

\begin{tabular}{|l|l|l|l|} \hline OptionsMarkets: & \multicolumn{4}{|l|}{ Call options (\$/) } \\ \hline & Strike & Bid & Ask \\ \hline & 1.30 & 0.040 & 0.041 \\ \hline & 1.40 & 0.031 & 0.034 \\ \hline & 1.46 & 0.028 & 0.030 \\ \hline & 1.50 & 0.021 & 0.026 \\ \hline & 1.60 & 0.196 & 0.020 \\ \hline \end{tabular} \begin{tabular}{|l|l|l|l|} \hline OptionsMarkets: & \multicolumn{4}{l|}{ Put options (S/f) } \\ \hline & Strike & Bid & Ask \\ \hline & 1.30 & 0.003 & 0.005 \\ \hline & 1.40 & 0.005 & 0.010 \\ \hline & 1.46 & 0.010 & 0.020 \\ \hline & 1.50 & 0.020 & 0.030 \\ \hline & 1.60 & 0.030 & 0.040 \\ \hline \end{tabular}