Consider a French portfolio manager who invests $10,000,000 in shares of a U.S. company. In order to

Question:

Consider a French manager who invests $10,000,000 in shares of a U.S. company. In order to hedge the stock market risk, he sells S&P 500 stock index futures that expire in three months. The current price of the S&P 500 stock index futures contract is 902 with a multiplier of $250. The current is €1.2/$. One month later, the investment in the U.S. Company is worth $10,050,000. The S&P 500 stock index futures price is now 890, and the is €0.98/$.
1. Calculate the number of futures contracts that the manager must sell.
2. Calculate the profit-or-loss in euro terms and dollar terms.
Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...