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1. The profit of multinational firm decreases by $500,000 for every $0.05 rise in the dollar/pound exchange rate. a) How many contracts should the firm

1. The profit of multinational firm decreases by $500,000 for every $0.05 rise in the dollar/pound exchange rate.

a) How many contracts should the firm enter to hedge the exchange rate risk if each pound-futures contract calls for delivery of 62,500 pounds?

b) Should it take the long side or the short side of the contracts?

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