Suppose the bid-ask spot prices for one British pound are $1.50 and $1.60 respectively.
1. Compute the bid-ask prices for one US dollar in terms of British pound.
2. Suppose the spot rate and one-year forward rate for the British pound are $1.40 and $1.50 respectively. Compute the discount/premium of the British pound and INTERPRET your results.
3. Discuss how currency options and currency forwards or currency futures can help an exporter or importer.