In October, a Denver Import Company is expecting in December to have to pay a bill to its Euro suppliers for 8,125,000 Euros and wants to hedge against a rise in the value of the Euro relative to the U.S. dollar in December when the payment is due.

At this time the spot exchange rate Euro is $1.1079 USD. The CME Group future settle rate for a December Euro FX futures contracts is 1 Euro = $1.1337 USD, with each futures contract for 125,000 Euros per contract.

a. What position and how many contracts should the financial manager take for the hedge? Explain why. (hint # contracts = Amount of Euros Hedging / 125,000 Euros per contract),

Type of Position _____________ Why this Position_____________

Number of Contracts_________

(round up to a whole number, since no partial contracts).