Problem 3 Exchange rate is currently $1.85 US per 1 British pound. Interest rate is 4% in the US and 3% in the UK. A bank is short a futures contract on 1,000,000 pounds with F= $1.9 million in one year. Use regular compounding (not continuous). a. Find the expected future spot exchange rate using the interest rate parity b. When is the bank facing losses: if the pound will appreciate, or if the pound will depreciate? c. Write the expression for the present value of the bank's short futures position, as a function of current spot exchange rate S d. Find the delta of the bank's position