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Find the forward price

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Suppose your company will need 100, 000 British pounds in 3 months to import goods from UK. You consider two choices: to buy pound right now or to enter a forward contract. Suppose the exchange of British pound is 10 Hong Kong dollar, the annual risk-free rate in Hong Kong is 2%, and the annual risk-free rate set by the Bank of England is 1%.

a. If you pick the first choice, how many Hong Kong dollars do you need right now?

b. Find the forward price such that you are indifferent between the two choices.

Reference no: EM132665989

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