A US based company (which pays attention only to income and outlays in terms of $) will receive 1M for the steel exported to UK 30 days from today. The companys risk manager wants to hedge the currency risk by using a forward contract. The rate for the forward contract is $1.47/ for a maturity of 30 days. Todays spot exchange rate is $1.50/.

a) What is the downside risk manager faces without a futures contract?

Appreciation or Depreciation of against $? (4 pts.) Just pick one of them.

b) Should the manager buy (long position) or sell (short position) futures contract to hedge this risk? (8 pts.) Just pick one of them.

c) Again, suppose after 30 days the spot rate is realized as $1.55/. Does the manager regret going with futures contract? Why? (8 pts)