You are the VP and Treasurer of a sizeable multinational firm. Assume that your general approach to hedging the Companys transaction risks is to do nothing. However you do, from time to time, like to play the market a little with the firms surplus cash and you frequently speculate on anticipated moves in currencies. One of those is the British Pound (GBP) and, based on your careful analysis, you truly expect the GBP to strengthen against the US Dollar in the next six months.

a. What investment (or set of investments) could be used to take advantage of this speculative expectation?

b. What is the degree of financial risk associated with the investment (or investments) you identified in part a. just above in the event you are wrong about the expected trend in the GBP/USD?