8. South Face. South Face, Ltd., a Canadian manufac- turer of raincoats, does not selectively hedge its trans- action exposure. Instead, if the date of the transaction is known with certainty, all foreign currency- denominated cash flows must utilize the following mandatory forward contract cover formula:

South Face expects to receive multiple payments in Danish kroner over the next year. DKr 3,000,000 is due in 90 days; DKr 2,000,000 is due in 180 days; and DKr 1,000,000 is due in one year. Using the follow- ing spot and forward exchange rates, what would be the amount of forward cover required by company policy by period?

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Exposure coverage required according to maturity If South Face is 0-90 days 91-180 days >180 days "paying the points forward" 75% 60% 50% "receiving the points forward" 100% 90% 50%