. Your firm has a British customer that is willing to place a $1 million order, but wants to pay in pounds instead of dollars. The spot exchange rate is $1.85 = 1.00 and the one-year forward rate is $1.90 = 1.00. The lead time on the order is such that payment is due in one year. What is the appropriate rate of exchange to calculate how many pounds the British customer owes, given the market data which you have available to estimate the exchange spot rate which will prevail in one year?

The answer is $1.90 according to expectation hypothesis

Can you explain why that is the answer?