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Your boss comes to you and says that new regulation means that forward contracts cant be honoured. A long time Client comes to you and

Your boss comes to you and says that new regulation means that forward contracts cant be honoured. A long time Client comes to you and says he needs to buy 1M SWF in the one year forward market (he would want to be short the GBP and long 1M SWF). The relevant financial data is as follows: R= 10% R*=5% S= 0.3000 GBP/SWF

  1. What will the cost of the 1M SWF be in one year? (Answer is in GBP)
  2. How many GBP do you need to borrow today to start the hedge?

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