Question: Please answer the two questions: 1. Your small US multinational business forecasts 45,000 Euro expenses to be paid in 6 months. You hedge 100% of

Please answer the two questions:

1. Your small US multinational business forecasts 45,000 Euro expenses to be paid in 6 months. You hedge 100% of the expenses using a call option with the strike price set at the EUR forward rate of 1.10. (The premium cost of the option is assumed to be $0 for this question). If the actual EUR foreign exchange rate in 6 months is 1.25, then what is the US dollar gain or loss on your hedged exposure?

2. Your small multinational US business has a 55,000 Euro capital expense to purchase some tools made in Germany in 6 months. The 6 month EUR forward rate is 1.14. You hedge 100% of the exposure using a forward contract. If the actual exchange rate in 6 months is 1.21, then what is the US dollar gain or loss on your hedge of your plan?

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