GAMESA is a Spanish company specialized in sustainable energy technologies, mainly wind power. GAMESA is positioned among the most important wind generator manufacturers in the world. On January 1 2010 GAMESA US has reached an agreement with SIEMENS to sell 10 generators for a total of €26 Million. Obviously this operation has a translation risk that GAMESA US wants to hedge assuming a short position in a Forward contract at one year maturity. Assume exchange rate on January 2010 is 1$/€. 

Which is the delivery price agreed in the Forward contract? 

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$ Value of Original Gain & Loss Money on Forward Contract (millions S) TOTAL CASH Spot exchange rate scenarios (12-31-2010) Receivable will FLOW (million S) (millions) 1€ = 1$ 1€= 0.95$ 1€ = 1.5$ 1€= 0.91$ 1€= 0.87$ (14.3) $ Value of Original Gain & Loss Money on Forward Contract (millions S) TOTAL CASH Spot exchange rate scenarios (12-31-2010) Receivable will FLOW (million S) (millions) 1€ = 1$ 1€= 0.95$ 1€ = 1.5$ 1€= 0.91$ 1€= 0.87$ (14.3)

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