A U.S. Company negotiated a forward contract to purchase

A U.S. Company negotiated a forward contract to purchase 650,000 euros in 60 days. The 60‑day forward rate was $1.20 per euro. The euros to be purchased were to be used to purchase French supplies. On the day the euros were delivered in accordance with the forward contract, the spot rate of the euro was $1.24.

(1) Calculate the number of dollars paid using the hedge.

(2) Calculate the number of dollars paid if the company hadn't hedged.

(3) Calculate the real cost of hedging for this U.S. company.


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