I need help

A Chicago merchant plans to import a shipment of materials from France costing 1,000,000. Spot exchange rate is $1.28. To hedge against a rise in the value of the euro, the merchant buys March euro futures at a futures price of $1.32. Contract size is 125,000. To offset the futures position, the merchant should:

Buy the same number of March euro futures contracts as was purchased at the outset

Sell U.S. dollar futures equal in size to the March euro futures.

Sell the same number of March euro futures contracts as was purchased at the outset

None of the abov

I need the answer for question 6

1. FORWARD CURRENCY CONTRACT. FOR THIS AND THE NEXT 2 QUESTION. Today, a US firm agrees to buy merchandise from Mexico worth 12 million Mexican pesos. The merchandise will be delivered in 60 days with payment to be made in 90 days (that is, 30 days after the goods are received). The current exchange rate is 16.40 pesos per USD. The US firm is afraid the dollar will depreciate against the peso by the payment date, which will make the dollar-cost of the merchandise more expensive than it is today. To hedge this risk, the US firm buys enough Mexican pesos in the 90-day forward market to completely cover the total cost of the merchandise. The 90-day forward exchange rate is 14.45 pesos per USD. Suppose that 90 days from now, when it's time to make payment, USD has lost 20 percent of its value. First, how much is the dollar value of the merchandise today?

   		$731,707.32
   		$776,699.03
   		$830,449.83
   		$914,634.15
   		None of the above

1 points

QUESTION 6

1. Without forward contract, what will be the total dollar cost of the merchandise 90 days from now?

   		$731,707.32
   		$776,699.03
   		$830,449.83
   		$914,634.15
   		None of the above