Du Pont has entered into a currency risk sharing arrangement with British Gas.

Du Pont has entered into a currency risk sharing arrangement with British Gas. Under thecontract, Du Pont agrees to pay British Gas a base price of $10 million for gas purchases, but theparties would share the currency risk equally beyond a neutral zone, specified as a band ofexchange rates: $1.67-1.73:£1. Within the neutral zone, Du Pont must pay BG the poundequivalent of $10 million at the base rate of $1.70. Suppose the spot rate at the time of paymentis £1 = $1.61.a. What is the settlement exchange rate?b. How much will Du Pont pay in dollars?c. How much British Gas get in pounds?