An FI Has a 1-Year 8-Percent US$160 Million Loan Financed

Multiple Choice

An FI has a 1-year 8-percent US$160 million loan financed with a 1-year 7-percent UK£100 million CD. The current exchange rate is $1.60/£. What should be the trading price of the BP futures contract at the end of the year in order for the FI to be perfectly hedged? That is, the FI earns its original anticipated spread without any effects of exchange rate changes?

A) $1.60/£.
B) $1.61/£.
C) $1.62/£.
D) $1.63/£.
E) $1.64/£.