You work for U.S.-based Google and are considering ways to hedge a 10 billion Danish kroner (DKK) obligation due in six months. Your currency of reference is the U.S. dollar. The current value of the kroner is in dollars and in euros.

a. A futures exchange in Copenhagen trades futures contracts on the U.S. dollar that expire in seven months with a contract size of $50,000. You estimate based on the regression

. The r-square of the regression is 0.98. How many futures contracts should you buy to minimize the risk of your hedged position?

b. A commercial bank in Chicago is willing to sell a customized euro (€) futures contract in any amount and maturing on the date that your obligation is due in six months. You estimate based on the regression . The rsquare of the regression is 0.89. How large a position in this euro futures contract should you take to minimize the risk of your hedged position?

c. Eurex in Frankfurt trades €/$ futures contracts that expire in seven months and have a contract size of $100,000. You estimate based on the regression .
The r-square of this regression is 0.86. How many futures contracts should you buy to minimize the risk of your hedged position?

d. Which of these futures market hedges provides the best quality?