[Maryam]

okay, Thank you very much Sir.

[Maryam]

Yes, after using the interest rate for 5 months to get the amount to be borrowed now in pounds, I still was not able to get the figure according to the solution. However, the question goes thus;

Lammer plc is a UK based company that regularly trades with companies in the USA. Several large transactions are due in five months time. these are shown below. The transactions are in ‘000 units of the currencies shown.

Assume now is 1 June and that futures and options contracts mature at the relevant month end.

net receipts is $1150000

exchange rates: $US/POUNDS
spot 1.9156-1.9210
3 months forward 1.9066-1.9120
1 year forward 1.8901-1.8945

Annual interest rates available to lammer plc

sterling up to 6 months 5.5%-4.2%
dollar up to 6 months 4.0%-2.0%

Thank you

[Author]

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