A French firm is buying $1,000,000 of optical cable from a firm in the United States. The French firm will pay for the cable in thirty days. To protect itself from changes in the exchange rate between the Euro and dollar, the French firm enters into a futures contract to purchase $1,000,000 at a price of $1.25/€. How many Euros will it cost the French firm to purchase $1,000,000 using the futures contract? a. €125,000,000 b. €2,500,000 c. €1,250,000 d. €1,000,000 e. €800,000

A French firm is buying $1,000,000 of optical cable from a firm in the United States. The French firm will pay for the cable in thirty days. To protect itself from changes in the exchange rate between the Euro and dollar, the French firm enters into a futures contract to purchase $1,000,000 at a price of $1.25/€. How many Euros will it cost the French firm to purchase $1,000,000 using the futures contract? a. €125,000,000 b. €2,500,000 c. €1,250,000 d. €1,000,000 e. €800,000

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter8: Relationships Among Inflation, Interest Rates, And Exchange Rates

Section: Chapter Questions

Problem 42QA

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A French firm is buying $1,000,000 of optical cable from a firm in the United States. The French firm will pay for the cable in thirty days. The French firm enters into a futures contract to purchase $1,000,000 at a price of $1.25/euros. How many Euros will it cost the French firm to purchase $1,000,000 using the futures contract?
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