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On March 2 0 , ABC Co . agrees to import auto parts worth $ 1 0 million from the U . S . The
On March ABC Co agrees to import auto parts worth $ million from the US The parts will be delivered on July and are payable immediately in dollars. ABC Co decides to hedge its dollar position by entering into CME futures contracts. The spot rate is $ and the July futures price is $ contract is for and delivery is on July
a Calculate the number of futures contracts that ABC must buy to offset its dollar exchange risk on the parts contract.
b On July the spot rate turns out to be $ while the July futures price is $ Calculate ABCs net euro gain or loss on its hedged position.
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