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As a US exporter selling to Europe. You wish to hedge a 1,040,000 Euro to be received in 3 months with futures or forwards. Futures contract sizes for the Euro are 125,000E each.  How many dollars will you receive/pay for the goods if you hedge with futures, forwards, and not hedging? Also, rank them?                         Now                End Spot                 1.100-01 $/E   1.300-01 $/E Futures            1.120   $/E       1.315      $/E Forwards         1.130-31 $/E

As a US exporter selling to Europe. You wish to hedge a 1,040,000 Euro to be received in 3 months with futures or forwards. Futures contract sizes for the Euro are 125,000E each.  How many dollars will you receive/pay for the goods if you hedge with futures, forwards, and not hedging? Also, rank them?                         Now                End Spot                 1.100-01 $/E   1.300-01 $/E Futures            1.120   $/E       1.315      $/E Forwards         1.130-31 $/E

International Financial Management
International Financial Management
14th Edition
ISBN:9780357130698
Author:Madura
Publisher:Madura
Chapter5: Currency Derivatives
Section: Chapter Questions
Problem 41QA
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As a US exporter selling to Europe. You wish to hedge a 1,040,000 Euro to be received in 3 months with futures or forwards. Futures contract sizes for the Euro are 125,000E each.  How many dollars will you receive/pay for the goods if you hedge with futures, forwards, and not hedging? Also, rank them?

                        Now                End

Spot                 1.100-01 $/E   1.300-01 $/E

Futures            1.120   $/E       1.315      $/E

Forwards         1.130-31 $/E

 

 

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