Describe how foreign currency options can be used for hedging in the situation considered in Section 1.7 so that (a) ImportCo is guaranteed that its exchange rate will be less than 1.2400, and (b) ExportCo is guaranteed that its exchange rate will be at least 1.2000. Use DerivaGem or another software package to calculate the cost of setting up the hedge in each case assuming that the exchange rate volatility is 12%, interest rates in the United States are 2% and interest rates in Britain are 1%. Assume that the current exchange rate is the average of the bid and offer in Table 1.1. Table 1.1 Spot and forward quotes for the USD/GBP exchange rate, May 3, 2016 (GBP 14 British pound; USD 14 U.S. dollar; quote is number of USD per GBP). Bid Offer Spot 1.4542 1.4546 1-month forward 1.4544 1.4548 3-month forward 1.4547 1.4551 6-month forward 1.4556 1.4561