The dollar/pound ($/£) exchange rate is currently $1.52/£1 and the following futures price exists for June 2024. June 2024 Futures (contract size £50,000) $1.50/£1 You work for an American travel company and are due to pay in June 2024, £100,000 for hotel bookings to the UK Hotel chain. 

Discuss how you may use the future’s contract to hedge the exchange rate risk, in your answer consider a range of possible future spot rates for dollar-sterling.

Answer rating: 100% (QA)

The main purpose of using a futures contract in this case would be to hedge against any potential vo... View the full answer