A U.S. exporter will collect 1 million from a British company in 30 days. The 30-day pound forward rate is $1.45.

(a) If the U.S. exporter decides to use a forward contract to hedge the transaction so that there is no uncertainty about the dollar payment, should the exporter buy or sell the forward contract? Why?

(b) What is the amount of dollars received for the U.S. exporter 30 days later with the forward contract you recommended in part (a)?

(c) If the spot rate expected in 30 days is $1.40, what is the net profit (or loss) of using this forward contract to hedge compared with the no-hedging case?