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On July 15, Unilever Company (a U.S. firm) purchases a futures contract specifying 3,000,000 Thai Baht with the September settlement date to hedge its exchange
On July 15, Unilever Company (a U.S. firm) purchases a futures contract specifying 3,000,000 Thai Baht with the September settlement date to hedge its exchange rate risk of 3,000,000 Thai Baht when it orders supplies from a Thailand supplier in September. This futures contract is priced at $0.030 per Thai Baht. On August 1st, Unilever realizes that it has no need for 3,000,000 Thai Baht in September since it will not need to order supplies. Unilever thus sells a futures contract specifying 3,000,000 Thai Baht with the September settlement date to offset the contract purchased in July. This futures contract is priced at $0.028 per Thai Baht. What is the result of these transactions to Unilever Company? Unilever Company makes a profit of 6,000 Thai Baht. Unilever Company makes a profit of $6,000. Unilever Company incurs a loss of 6,000 Thai Baht. Unilever Company incurs a loss of $6,000
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