DASFirm GmbH. is based in Germany. DASFirm manufactures high-tech water filtering systems. TrueNorthWaters Corp. is a soft drink company based in Canada. Today, TrueNorthWaters bought a new system from DASFirm for EUR 6,700,000 to be paid, in Euros, in 90 days.

a. Is TrueNorthWaters worried that the Euro (EUR) may appreciate or depreciate against the Canadian dollar (CAD) over the next 90 days? Briefly explain. No calculations required. (2 points)

b. Assume the following market quotes today

Spot rate = CAD 1.5550 per EUR and Forward 90 day = CAD 1.5475 per EUR

How can TrueNorthWaters hedge their currency risk using the forward market? What are the cash in/ouflows associated to this forward market transaction today and in 90 days for TrueNorthWaters? Show detailed calculations. Use 4 decimals. (4 points)

c. Based on your previous answer (question b above), calculate TrueNorthWaters profit or loss and if the spot rate in 90 days is CAD 1.6230 per EUR. Show detailed calculations. Use 4 decimals. (2 points)