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Your company will pay 1 million British pounds ( GBP ) in one year. You want to hedge the exchange rate risk. You collected the
Your company will pay million British pounds GBP in one year. You want to hedge the exchange rate risk. You collected the following data:Spot exchange rate: USDGBPPrice of a put on the GBP with strike price USDGBP: USDPrice of a call on the GBP with strike price USDGBP: USDSize of options contracts: GBPU.S interest rate: percent APRU.K interest rate: percent APR
What is the maximum cost in USD net of the future value of the cost of the options that the company will pay in one year?Note: provide your answers with four decimal points and in millions of USD. Please do the calculations in Excel and round up the results to four decimal points only at the end, once the calculations are completed.
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