Mistor S.A. is a large, event-management business based in Spain that has recently agreed to organise a large trade fair in the US. On 1 August Year 7, the business expects to receive \($10\) million for the work carried out and expects to pay suppliers and sub-contractors \($7\) million for their contribution to the fair. The business wishes to hedge against the risk of currency fluctuations and is considering the use of either a forward contract or futures contracts to achieve this. It is now 1 December Year 6 and the following information is available:
1. The spot rate is quoted as \($1.1300\) per € and the August Year 7 forward rate is quoted at \($1.109\) per €.
2. Euro futures contracts with a September Year 7 settlement date are quoted at \($1.0950\) per €.
3. The contract size for euro futures is €125,000. The tick size is 0.01 cents and the tick value of each contract is \($12.50\). 

Assume that on 1 August Year 7 the spot rate is \($1.0860\) per € and that the September Year 7 futures price will be \($1.0640\) per €.

Required:

(a) State, with reasons, how much should be hedged using either a forward contract or a futures contract.

(b) Assuming a forward contract is used to hedge against currency risk, calculate the net amount to be received in euros.

(c) Assuming futures contracts are used to hedge against currency risk, calculate the number of futures contracts required, the total profit or loss arising from using futures contracts and the net amount to be received in euros.

(d) Comment on the results obtained in your calculations in (b) and (c) above.