A Ghanaian businessman received a loan of US$ 2000,000 on 1st January 2010 from the United States to finance his business in Ghana at a time when the exchange rate is ¢1.400/$. He is to pay the loan on 31st December 2010. He thinks that he has borrowed at a time when the United States Dollar is at its lowest hence, he is afraid that by December 2010, the exchange rate may have moved to ¢1.515/$. Standby is offering a forward contract at a flat fee of GHP20 per dollar to be delivered on 31st December 2010 at an exchange rate of ¢1.455/$. The company’s treasurer is advising that they should buy the contract and lock in the exchange rate at ¢1.455/$. You are required to show by calculation and explanation the reasonableness of this advice

(a) If the spot rate in December 2010 turns out to be ¢1.515/$ as predicted

(b) If the spot rate in December 2010 turns out to be ¢1.555/$

(c) If the spot rate in December 2008 turns out to be ¢1.405/$