On NOV 15, 2018 a multinomial US firm expects a cash flow of EUR5,000,000 (from a project

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Question:

On NOV 15, 2018 a multinomial US firm expects a cash flow of EUR5,000,000 (from a project in France) by the end of the quarter, MAR 31, 2019. The firm decided to exchange the EUR5M into USD and deposit the US dollars in the firm’s NYC account as soon as the Euros are received form the project. It also decided to hedge its exchange rate risk using the JUN, 2019 EUR futures.

The NOV 15, 2018 spot exchange rate was: S = USD1.2/EUR and the JUN 2019 futures exchange rate was F10.15.2018; 6.19 = USD1.26/EUR.

One EUR futures is for EUR125,000.

5.1 Use a time table to describe the spot and futures hedge positions on NOV 15, 2018.

5.2 Use the same time table to show how the US firm closed it’s positions

on MAR 31, 2019 when the spot exchange rate was S = USD 1.1/EUR and the JUN 2019 futures exchange rate was F3,31,2019; 6.2019 = USD1.16/EUR. Also, calculate the total USD amount deposited by the firm in it’s NYC account.