5.

Todays date: May 7, 2021

You work at the Treasury department of Apple, Inc. and oversee Apples FX risk management. Suppose Apple has an account receivable of 1,452,890 due on June 7, 2021, 30 days from now. You are concerned with the potential decline in value vs. $ and want to hedge the position. The research department has provided following data to assist you with your hedging decision.

Currency Options available from the Philadelphia Stock Exchange
Type	Exercise price	Premium	Maturity date
Call	$1.4200	$0.010 per	6/7/2021
Put	$1.4200	$0.035 per	6/7/2021

Annual money market interest rates
Rates	U.S.	UK
Borrowing	5.30%	4.60%
Deposit	2.20%	1.45%

In addition, the following are the actual and expected spot and futures prices for May 7, 2021, and June 7, 2021.

Prices	Actual rates on 5/7/2021	Assume actual rates on 6/7/2021
Spot exchange rate	$1.3910	$1.4064
June 2021 futures price (settlement price)	$1.3980	$1.4108

On May 7, 2021, Apple and Chase entered into a 30-day forward contract (the forward contract matures on June 7, 2021). The agreed forward rate is $1.4100 per .

Additional information:

• One futures contract on is for 62,500
• One options contract on is for 10,000

Given above information, answer the following question.

4) Calculate the net gain or loss from futures hedging. Show all your calculations.