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It is 12th January and the following information is available for Euro () currency futures prices (contract size 62,500): March 0.6871/ June 0.6915/ September 0.6990/

It is 12th January and the following information is available for Euro () currency futures prices (contract size 62,500): March 0.6871/ June 0.6915/ September 0.6990/ Note: Assume there are 360 days in a year.

(i) A Portuguese company is due to receive British Pound () 8 million in June. Show how the company can hedge its transaction risk using currency futures, assuming that the spot rate on expiry of the June futures contract is 0.6900/.

(ii) A Dutch company expects to pay British Pound () 3.5 million to a British supplier in September. Show how the company can hedge its transaction risk using currency futures, assuming that the spot rate on expiry of the September futures contract is 0.6960/

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