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You are US company, 500,000 BP (British Pound) payable to UK in one year. Answer in terms of US$. 1 Information for Forward Contract: Forward

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You are US company, 500,000 BP (British Pound) payable to UK in one year. Answer in terms of US$. 1 Information for Forward Contract: Forward exchange rate (one yr): 1.54 $/BP 1 Information for Money Market Instruments (MMI): Current exchange rate: 1.50 $/BP e Investment return at Aerion Fund Management (in UK): 4% annual d Interest rate of borrowing from Bank of America (in USA): 2% annual | Information you need for Currency Options Contract: Options premium: 0.015 $/BP Interest rate of borrowing from Bank of America (USA): 2% annual Allowed to exercise options at 1.54 $/BP 1 If the break-even exchange rate for the Currency Options Contract is 1.46 $/BP, and you believe the exchange rate at the time of the payment would be 1.43 $/BP, should you sign the contract? O No

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