Futures Homework Problem #$2$

$1)$ You will pay $525,000$ euros in $90$ days. The $90$ day forward rate is $$1\mathrm{.}06.$ You want to hedge with the closest hedge possible. Each Futures Contract is for $125,000$ euros.

a$)$ What is the number of Contracts you need?

b$)$ Do you want Contracts to buy or sell the euro?

c$)$ If the Spot rate in $90$ days when you pay the $525,000$ euros is actually $$1\mathrm{.}09$ what is your net exchange rate combining your Cash position $(525,000$ euros$)$ and your gain or loss on the Futures Contract? $($Show your Futures Contract calculations$)$

$2)$ You will receive $425,000$ euros in $90$ days. The $90$ day forward rate is $$1\mathrm{.}08.$ You want to hedge with the closest hedge possible. Each Futures Contract is for $125,000$ euros.

a$)$ What is the number of Contracts you need?

b$)$ Do you want Contracts to buy or sell the euro?

c$)$ If the Spot rate in $90$ days when you receive the $425,000$ euros is actually $$1\mathrm{.}06$ what is your net exchange rate combining your Cash position $(525,000$ euros$)$ and your gain or loss on the Futures Contract? $($Show your Futures Contract calculations$)$