Question: On September 1st, A&F Co. ordered raw material from German and agreed to pay 150 million euros for this order on December 1st. It negotiated

On September 1st, A&F Co. ordered raw material from German and agreed to pay 150 million euros for this order on December 1st. It negotiated a 2-month forward contract to obtain 150 million euros on that date at $1.32. On October 1st, the German firm informed A&F Co. that it won't be able to fulfill that order. The euro spot rate on October 1st is $1.35 and 1-month forward rate exhibits 2% discount. To offset its existing contract, A&F Co. will negotiate a forward contract to ____ for the date of December 1st and the profit/loss generated from this transaction is a ____ U.S. dollars.

buy euro; loss of $450,000. sell euro; loss of $450,000 sell euro; gain of $450,000 buy euro; gain of $450,000

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