You have a 1 million payable due in 3 months.

You have a £1 million payable due in 3 months. Show on a chart 

  1. a)  The dollar cost of the unhedged payable as a function of the spot exchange rate 3 months from now 
  2. b)  The profit (loss) from a 3-month £1 million call option with a strike price of $1.75/£ and a premium of $0.40/£. 
  3. c)  Your total cash flow 3 months from now 
  4. d)  What would be your total cash flow if you hedged with a forward contract. Assume that the forward price is also $1.75/£ 

Can you show me how to solve this step by step?

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