Question: Given the following facts, complete problems A and B below: Spot rate - $2/ 3 month Forward rate - $1.98/ 3 month U.K. (U.S.) interest

Given the following facts, complete problems A and B below:

Spot rate - $2/

3 month Forward rate - $1.98/

3 month U.K. (U.S.) interest rate - 4% (3%) per year.

3 month put contract with a strike price of $1.99/ with a 4% premium

3 month call option with a strike price of $1.99/ with a 3.5% premium

A) How would company ABC hedge a 200 million receivable? Which alternative would you pick?

B) How would company ABC hedge a 400 million payable? Which alternative would you pick?

*Please show me how you got the answers, not just the answers. Thank you!*

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