Suppose the spot exchange rate is C$1.4665 per 1, while the six-month forward rate is C$1.50 per

Question:

Suppose the spot is C$1.4665 per €1, while the six-month forward rate is C$1.50 per euro. Suppose a firm has to pay a foreign supplier €100,000 in six months and decides to eliminate its foreign exchange exposure by entering into a six-month forward contract.
a. Should it enter into a short or a long forward position, and if so, for how much?
b. Assuming it enters into the appropriate forward position, determine the cost in Canadian dollars for the following future spot rates:
i. C$1.40 per euro
ii. C$1.60 per euro

Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...