Question
At the start of the sample period, your company receives 5,000,000 Euros, which you plan to convert into US dollars at the end of sample
At the start of the sample period, your company receives 5,000,000 Euros, which you plan to convert into US dollars at the end of sample period for tax reasons.
Since the foreign exchange rate changes every day, the US dollar value of your foreign currency at the end of the sample period will be uncertain. Your objective is to reduce this exchange rate risk. You decide to hedge this risk using EUR/USD (=Euro FX) futures contract expiring in June 2015.
What is the contract size of EUR/USD futures contract?
At the start of the sample period, your company receives 5,000,000 Euros, which you plan to convert into US dollars at the end of sample period for tax reasons.
Since the foreign exchange rate changes every day, the US dollar value of your foreign currency at the end of the sample period will be uncertain. Your objective is to reduce this exchange rate risk. You decide to hedge this risk using EUR/USD (=Euro FX) futures contract expiring in June 2015.
What is the contract size of EUR/USD futures contract?
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Government and Not for Profit Accounting Concepts and Practices
Authors: Michael H. Granof, Saleha B. Khumawala
6th edition
978-1-119-4958, 9781118473047, 1118155971, 1118473043, 978-1118155974
