You are UK company, 200,000 US$ payable to US in one year.Answer in terms of BP (British Pound). Round at four decimal placesExamples: 1.23487 ---> 1.2349; 1.23533 --> 1.2353 Informationfor Forward Contract: Forward exchange rate (one yr): 0.7124 BP/$Information for Money Market Instruments (MMI): Current exchangerate: 0.7173 BP/$ Investment return at JP Morgan (in US): 5% annualInterest rate of borrowing from HSBC (UK): 3% annual Informationyou need for Currency Options Contract: Exercise options premium at0.09 BP/$ Interest rate of borrowing from HSBC (UK): 3% annualAllowed to exercise options at 0.7215 BP/$ Under the COC, thebreak-even exchange rate is .6109 BP/$. If the management teamspeculates the exchange rate at the time of the payment would be.6223 BP/$, would they sign the COC contract in this case? NoYes
