Question: 1. If the current exchange rate between the US and the UK is such that the current price of a pound is $1.20. What is

1. If the current exchange rate between the US and the UK is such that the current price of a pound is $1.20. What is the expected future exchange rate in one year if the US risk free rate is 2% and the UK risk free rate is 2.5% (use 5 decimal places)?

2. Price a 3 month call using a one step binomial tree where the risk free rate is 2.48%. Where S₀ is $50, the strike price is 52 and it can increase or decrease by 10% with equal probability. Please use 4 decimal places in your response

3. Use a 10% Coupon bond with semiannual payments and a 20 year maturity. 1000 par.

After five years the issuing firm of the coupon bond is in financial distress, if the coupons are guaranteed but the principal payment is expected to only have 44% of it paid back. If investors expect a 10% expected yield to maturity, at what price will this bond sell at time 5 years? Please use 5 decimal places in your response

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