Question: Please answer the two questions: 1. Your small multinational US business has a 35,000 Euro consulting expense to pay for some consulting work in Spain

Please answer the two questions:

1. Your small multinational US business has a 35,000 Euro consulting expense to pay for some consulting work in Spain in 6 months. The 6 month EUR forward rate is 1.29. You hedge 100% of the exposure using a forward contract. If the actual exchange rate in 6 months is 1.12, then what is the US dollar gain or loss on your exposure within your business plan?

2. Your small multinational US business has a 30,000 Euro capital expense to purchase some tools made in Germany in 6 months. The 6 month EUR forward rate is 1.11. You hedge 100% of the exposure using a forward contract. If the actual exchange rate in 6 months is 1.28, then what is the US dollar gain or loss on your exposure within your business plan?

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