You are working on the foreign exchange desk at Goldman Sachs and a customer has called who would like to enter into an off-market forward to buy 125,000 in 6 months for $1.95/. If your desk takes the other side of the contract, then you agree to deliver 125,000 in 6 months and receive $1.95/. To answer the questions below, you will need some information about current market prices:

1) The current exchange rate is $1.97/.

2) For every $1 that you borrow/lend today, you will owe/receive $1.0202 in 6 months.

3) For every 1 that you borrow/lend today, you will owe/receive 1.0356 in 6 months.

Please answer the following questions and make your answer accurate up to the second digit after the decimal point (I recommend that you keep at least four digits in the intermediate steps.).

Questions:

1. By taking the other side of the contract, you agree to receive _________ U.S. dollars in 6 months in exchange for 125,000.

2. To hedge the British pounds that you must deliver in 6 months, you should lend _________ British pounds today for 6 months. (Please fill in the amount of British pounds you should lend in order to receive the exact amount that you need to deliver under the forward contract.)

3. Under the forward contract, you will receive dollar in the future. To completely offset your receipt of US Dollars in six month, you should borrow _________ U.S. dollars today for 6 months.