Imagine that in September, a U.S. company agrees to buy industrial equipment from a German manufacturer....
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Imagine that in September, a U.S. company agrees to buy industrial equipment from a German manufacturer. Payment of 1 million euros is due upon delivery in December. As of September, the euro/dollar exchange rate is $1.36 (1.36 dollars to buy 1 euro). The company is worried that the euro might appreciate until the payment due date and wants to hedge its currency exposure using futures contracts. The current price of Euro FX futures maturing in December is $1.37. Each contract represents an underlying value of 125,000 euros. Enter a positive number for long or a negative number for short positions. a) How many contracts should the company long or short? | Enter a positive number for a profit or a negative number for a loss. If the spot price of euro rises to $1.46 by December, then b) What would be the profit or loss on the payment that is due, compared to setting aside 1 million euros in September? $ c) What would be the profit or loss on the futures contract? $ Imagine that in September, a U.S. company agrees to buy industrial equipment from a German manufacturer. Payment of 1 million euros is due upon delivery in December. As of September, the euro/dollar exchange rate is $1.36 (1.36 dollars to buy 1 euro). The company is worried that the euro might appreciate until the payment due date and wants to hedge its currency exposure using futures contracts. The current price of Euro FX futures maturing in December is $1.37. Each contract represents an underlying value of 125,000 euros. Enter a positive number for long or a negative number for short positions. a) How many contracts should the company long or short? | Enter a positive number for a profit or a negative number for a loss. If the spot price of euro rises to $1.46 by December, then b) What would be the profit or loss on the payment that is due, compared to setting aside 1 million euros in September? $ c) What would be the profit or loss on the futures contract? $
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Related Book For
Financial Reporting and Analysis
ISBN: 978-1259722653
7th edition
Authors: Lawrence Revsine, Daniel Collins, Bruce Johnson, Fred Mittelstaedt, Leonard Soffer
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