1. On January 10^th, Tesla agrees to sell parts worth 7 million euro to Germany. The parts will be delivered om March 4^th. Tesla decides to hedge its euro receivables by entering into IMM futures contracts. The spot rate is $8947/euro and the March futures price is $1.9002/euro. March futures contracts mature in third Wednesday of March.

1. Calculate the number of futures contracts that Tesla must sell to offset its euro exchange risk on the parts contracts. Assume a single futures contract for euro is 125000.
2. On March 4^th, the spot rate turns to be $2.2500/euro, while the March futures price is $2.2600/euro. Calculate Teslas net dollar gain or loss on its futures position. How much is the total cost of this hedge for Tesla. Do you think the hedge wan effective? Explain.