Work on the following assignment using excel please follow the instructions

FIN 5545 Project: Currency Exchange Rate Risk Hedge Due date: 6/25/2017 (end of week 7, Sunday not Monday) Submit 1 Excel file (or 1 Excel + 1 Word) to Blackboard Read the notes section at the end. It will answer most questions. The sample period for this project is from 5/15/2017 (today) to 6/16/2017 (5 weeks). You will need to collect real-time data starting from today. At 4pm, today, your company receives 8,750,000 Euros. If you convert 8.75 million Euros now, it will be USD 9,611,875. You are extremely happy with this current exchange rate and would take this US dollar value. But if you convert now, you have to pay a super high tax. Instead, you decide to convert later and delay paying the tax. This delayed action comes with a big risk. Since EUR/USD exchange rate fluctuates every day, the US dollar value of your Euros in future will no longer be the same USD 9,611,875. This risk is called currency risk, aka foreign exchange rate (FOREX) risk. The objective of this project is to design a strategy such that the values stay as close to $9,611,875 throughout whole the sample period. The financial instrument is Euro FX futures contract expiring in September 2017. 10 Questions (each is worth 1 point, consider each as a rubric): 1. What is the difference between Euro FX futures and Eurodollar futures? Note that this question is not asking what the difference between Euro FX and Eurodollar is 2. What is the contract size of the Euro FX futures contract? How about British Pound futures contracts? 3. What action do you need to take with 09/2017 Euro FX futures today? Specifically, Long or Short? How many contracts? And most important. Explain why you have to take such position in detail. The rest of this project will prove your action will actually work at the end. 4. For every trading day (no weekends/holidays) during the sample period, collect the daily EUR/USD exchange rate and Euro FX futures price. Create a spreadsheet and enter (1) date, (2) exchange rate, and (3) futures price. Hint: If you do not want to collect these prices manually every day, see Note section at the end to learn where to find price histories. 5. In the next columns, calculate daily gains and cumulative gains of your Euro FX futures position each day. Calculate these values in Excel. Do not manually enter the values. If I don't see Excel command behind your answers, I'll assume you copied someone else's answers, which is not acceptable for an individual project. 6. Assume the initial margin requirement is $10,000 per contract and the maintenance margin requirement is $8,000 per contract. Calculate the margin account balance each trading day. Is there a margin call? If yes, add the required cash to the margin account to avoid liquidation. 7. For each day, calculate the USD value of your 8.75 mil Euros (= unhedged position), In addition, calculate the values of your hedged position (= unhedged value + futures cumulative gain in Q5). 8. Plot the unhedged values and hedged values in Q6 over time. Calculate the standard deviations of the unhedged values and that of the hedged values from Q6. Discuss whether your strategy in Q3 successfully lowered the exchange rate risk. If you have trouble with Excel plots, ask for help in Hangouts. 9. Using your Q9 answers, confirm that your strategy in Q3 successfully lowered the exchange rate risk. 10. If FOREX increases, the USD value of 8.75M Euros will be higher, which benefits you. Suppose you want to enjoy this positive payoff opportunity but still want to hedge against FOREX drop. Which financial instrument will suit this purpose? IMPORTANT NOTES. Note 1: For hints, review session 1, futures market. Specifically, daily settlement part to understand how daily gains/losses are accrued each day. Note 2. Submit 1 Excel file with all your answers/tables/plots. You can submit multiple times. I will only grade the last submission. If you prefer, submit both Word and Excel files together in 1 submission. Note 3. For any calculation question, you must do all the calculations in Excel. If I can't see your calculations, I'll assume you copied someone else's answers. Note 4. I highly encourage you to work in group. If you get lost, ask for help in group texting. You can even share the data and discuss results with your colleagues. Do NOT share your file or copy other's answers. You must create your own Excel file from scratch. If I find 2 students sharing and copying answers, I'll give F to both students. Note 5. If you want to know whether your answer is right or wrong, don't ask me in private. I can't answer because it's not fair to the class. You will be better off asking in the group chat, where your colleagues and I can help. Note 6. To collect Euro FX futures price every day, I recommend http://www.cmegroup.com. CME is the official exchange where futures are traded. Navigate and locate the relevant futures for this project. You only need to record the last (or settle) price. Open, high, low prices are not needed. Note 7. To collect EUR/USD exchange rate (FOREX), you can use any resource such as Bloomberg, Google or Yahoo. Each website may have slightly different rates, which is normal because of trading hours. For consistency, try to use the same source throughout. In the past, Bloomberg yielded the best results because it provides exchange rate upto 4 decimal points. Note 8. Futures price and FOREX will not be identical to each other. But they should be very similar. If your FX futures price and FOREX differ by more than 10 cents, then it's most likely your error. Note 9. https://www.quandl.com/data/CME provides price history of CME futures. You can use this database to collect the futures price data later instead of collecting the price every day from http://www.cmegroup.com. Navigate the website to locate the correct futures for this project. You can also download the data. Try it now to get familiar with the website before too late. Or find a friendly classmate, who is willing to share the data. Note 10. Your final spreadsheet must include at least the following columns for each trading day: 1) Date, 2) EUR/USD exchange rate, 3) Euro FX futures price, 4) Futures daily gain, 5) Futures cumulative gain, 6) Margin account balance, 7) Unhedged value and 8) Hedged value. Note 11. As of now, 8.75 mil Euros is worth $9,611,875 USD. If your unhedged values differ more than $1,000,000 from this number, you made an error