BP Cars Ltd is a reconditioned car dealer in Mauritius and imports its cars from the Asian and European markets. All payments to its foreign counterparts are done in US Dollars and payment terms are cash against documents, that is, all import payments have to be made before BP Cars Ltd can have access to the shipping documents. Normally, BP cars Ltd have 2 months from the transaction date to make payment of its imports With the impact of Covid19, the FX market has been very volatile and uncertain in terms of the volatility of the MUR/USD rate. This has significantly eroded the profit margin of BP Cars Ltd. Required: i. BP Cars Ltd would like to explore derivative instruments for hedging the foreign exchange rate risk. Advise BP Cars Ltd whether forward contract or futures contract will be more suitable to its requirements. Provide the rationales for your advice. BP Cars Ltd contracted a USD foreign currency loan for six months to fund its working capital requirement as availability of US dollars has been scarce and the spot rate volatile. The details of the loan are as follows: Loan 1: USD 4 million with interest and capital payable at maturity. The loan has floating rate. On 1 June 2021, BP Cars Ltd drew funds under USD loan and fully hedge the currency risk of the principal value of the loan for the next six months. Data are presented in Exhibit 1 . Exhibit 1 Foreign Exchange Rates l June 2021 Spot rate (MUR/USD) 34.77 December dollar futures contract (size = USD 100,000) (MUR/USD) 35.10 In order to hedge the loan book, BP Cars Ltd took a long position with 40 December dollar futures contract On 1st December, BP Cars Ltd Ltd is informed that loan repayments inclusive of interest are as follows: USD 4.2 million. Current foreign exchange data are presented in Exhibit 2. Exhibit 2 Foreign Exchange Rates 1 December 2021 Spot rate (MUR/USD) 36.27 April dollar futures contract (size = USD 100,000) (MUR/USD) 36.63 ii. Advise BP Cars Ltd if the company has benefitted from the hedging strategy with the futures contract. You are required to provide support calculation to justify your