C. Describe a hedge that the firm can execute. Explain all transactions clearly. Calculate the gain from the hedge using the information above.

d. Compute the effective revenue from the sale abroad after taking the gain/loss from the hedging transaction.

1. On July1, a company makes a sale for which it will receive 125,000 on September 1. The firm will want to convert these to dollars, so the transaction is exposed to the risk that the will depreciate against the U.S. $. The Euro futures contract size is 125,000 July 1 Sept. 1 Spot rate $1.3622/ $1.31421 September Euro futures $1.3356/ $1.29377 U III X , x? Insert Formula a. State what kind of hedge the firm should take and why? b. Calculate the additional cost of waiting to receive its revenue. 1. On July1, a company makes a sale for which it will receive 125,000 on September 1. The firm will want to convert these to dollars, so the transaction is exposed to the risk that the will depreciate against the U.S. $. The Euro futures contract size is 125,000 July 1 Sept. 1 Spot rate $1.3622/ $1.31421 September Euro futures $1.3356/ $1.29377 U III X , x? Insert Formula a. State what kind of hedge the firm should take and why? b. Calculate the additional cost of waiting to receive its revenue