Question: Problem 1 On September 1 st Lockheed Martin a US company recorded a 6-month payable of 35,000,000 that they decide to hedge on the future

Problem 1

On September 1st Lockheed Martin a US company recorded a 6-month payable of 35,000,000 that they decide to hedge on the future market. The contract size of the future contracts is 62,500. The quote of the March future contract is 1.29 while the spot rate is 1.26.

  1. Explain how Lockheed Martin will hedge this receivable and how many future contracts will be bought or sold? (2 points)

  1. What is the net mount in dollars that Lockheed Martin will pay for this payable on March 1st if the quote of the March future contract is $1.32 and the spot rate for the on March 1st is 1.30 (2 marks)?

  1. Explain if Lockheed Martin benefited from hedging

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