A US exporter will get paid 50,000 Norwegian krone (NOK) by a Norwegian customer. The payment is expected in 4 months.

Spot exchange rates	4-month Futures Price	1-year Futures Price
8 NOK/USD	8.25 NOK/USD	8.5 NOK/USD

The contract size is 12,500 NOK

7) Detail a strategy using futures contracts that will hedge this exchange rate risk. If you go long any of the two futures contracts this means that you agree to buy Norwegian krone.

A) Go long 4 NOK 4-month futures contracts.

B) Go short 4 NOK 4-month futures contracts.

C) Go short 2 NOK 4-month futures contracts and go long 2 NOK 1-year futures contract.

D) Go long 8 NOK 4-month futures contracts.

E) none of the options.

8) If the US exporter would get paid 72,500 NOK in 3 months the exporter would not be able to hedge perfectly due to,

A) Size mismatch

B) Maturity mismatch

C) Hedge mismatch

D) Both (A) and (B)

E) None of the above. It is possible to hedge completely.