(13 points) A U.S. multinational, Hoola Hoopa, Inc., hired a Canadian IT consulting firm toupgrade its international network. In 6 months when the contract is over, Hoola Hoopa willneed 1.5 million Canadian dollars to pay the consultants. The company needs to decidewhether or not it should enter into a forward contract to hedge its exchange rate risk. Fill inthe answers below using the US$ Equivalent rates listed in the table below.

Country U.S. $ Equivalent Mon Fri Canada (Dollar) Monday 0.6879 Friday 0.6879

1-month forward Monday 0.6868 Friday 0.6869

3-months forward Monday 0.6844 Friday 0.6845

6-months forward Monday 0.6803 Friday 0.6804

(a) The most recent Canadian dollar spot rate is

(b) Canadian dollar 6-mo forward rate on Monday is

(c) What it would cost Hoola Hoopa if the company were to buy Canadian dollars at the spotrate?

(d) What it would cost Hoola Hoopa if it hedged with a forward contract to buy 1.5 millionCanadian dollars 6 months later?

(e) Compare the cost of the forward contract, or the hedged position, with the cost of buyingthe Canadian dollars on the spot market in 6 months. Fill in the table below to show the costof buying CD$1.5 million at different spot rates, and then calculate Hoola Hoopa?s potentialgains or losses from hedging with a forward contract.

Spot Rate in 6 months	Unhedged Position	HedgedPosition	Potential Gains/lossesin US$ from Hedge
0.6700
0.6803
0.6900

(13 points) A U.S. multinational, Hoola Hoopa, Inc., hired a Canadian IT consulting firm toupgrade its international network. In 6 months when the contract is over, Hoola Hoopa willneed 1.5 million Canadian dollars to pay the consultants. The company needs to decidewhether or not it should enter into a forward contract to hedge its exchange rate risk. Fill inthe answers below using the US$ Equivalent rates listed in the table below. Country U.S. $ Equivalent Mon Fri Canada (Dollar) Monday 0.6879 Friday 0.6879 1-month forward Monday 0.6868 Friday 0.6869 3-months forward Monday 0.6844 Friday 0.6845 6-months forward Monday 0.6803 Friday 0.6804 (a) The most recent Canadian dollar spot rate is (b) Canadian dollar 6-mo forward rate on Monday is (c) What it would cost Hoola Hoopa if the company were to buy Canadian dollars at the spotrate? (d) What it would cost Hoola Hoopa if it hedged with a forward contract to buy 1.5 millionCanadian dollars 6 months later? (e) Compare the cost of the forward contract, or the hedged position, with the cost of buyingthe Canadian dollars on the spot market in 6 months. Fill in the table below to show the costof buying CD$1.5 million at different spot rates, and then calculate Hoola Hoopa's potentialgains or losses from hedging with a forward contract. Spot Rate in 6 months Unhedged Position HedgedPosition Potential Gains/lossesin US$ from Hedge 0.6700 0.6803 0.6900