Cray Research sold a supercomputer to the Max Planck Institute in Germany on credit

and invoiced $12\mathrm{.}60$ million payable in six months. Currently, the six$-$month forward

exchange rate is $$1\mathrm{.}23$ per euro and the foreign exchange adviser for Cray Research

predicts that the spot rate is likely to be $$1\mathrm{.}18$ per euro in six months.

Required:

a$.$ What is the expected gain$/$loss from a forward hedge?

Note: A Negative value should be indicated with a minus sign. Do not round

intermediate calculations. Round your final answer in whole dollars not in

millions.

b$.$ If you were the financial manager of Cray Research, would you recommend hedging

this euro receivable?

c$.$ Suppose the foreign exchange adviser predicts that the future spot rate will be the

same as the forward exchange rate quoted today. Would you recommend hedging

in this case?

d$.$ Suppose now that the future spot exchange rate is forecast to be $$1\mathrm{.}30$ per euro.

Would you recommend hedging?