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Suppose your company will need 100,000 British pounds in 6 months to import goods from UK. You consider two choices: to buy pound right now

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Suppose your company will need 100,000 British pounds in 6 months to import goods from UK. You consider two choices: to buy pound right now or to enter a forward contract. Suppose the exchange rate of British pound is 10 Hong Kong dollar, the annual risk-free rate in Hong Kong is 2%, and the annual risk-free rate set by the Bank of England is 1%. a. If you pick the first choice, how many Hong Kong dollars do you need right now? b. Find the forward price such that you are indifferent between the two choices

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