Question

A US based IT firm required GBP 100000 in 180 days. The company feels that exchange
rates are expected to fluctuate in the next 6 months. Their near accurate estimate based
on a good quality research were as below:
Current Rate of GBP = USD 1.50
180 days forward rate for GBP = USD 1.48
Call premium USD 0.02 (strike price of USD 1.50 for 180 days)
Interest Rates in London for deposits – 4.5% and for loans – 5.1%
Interest Rates in New York for deposits – 4.5% and for loans – 5.1%
A fair estimate of exchange rate after 180 days is expected to be USD 1.44 with a
probability of 20%, USD 1.46 with a probability of 60% and USD 1.53 with a
probability of 20%.
Advise the company on a good hedging strategy.

Answer 1

I will call me later on when I can see if I could go with

Answer 2

Answer:

Your company should be banned