Q6 (25 marks) Erhemjamts plc (Erhemjamts) is a UK listed company that imports and exports goods on a regular basis. On 1 November 20X6 Erhemjamts signed three contracts. Payment of the sums due under each of these three contracts is to be made on 30 April 20X7. Brief details of the three contracts are as follows: A sale of goods to A Inc, a US customer, for $411,000 A sale of goods to B Inc, another US customer, for 1,100,000 A purchase of goods from C Inc, a US supplier, for $1,750,000 On 1 November the $/ spot rate was quoted at $1.3800 information regarding sterling futures contracts: (contract size 62,500) 1.3830/ and the following Settlement date Contract price $/ December 1.3670 March 1.3480 June 1.3270 September 1.3190 a) Explain how a futures hedge could have been established and executed on 1 November, making clear the precise contract that would have been used, whether that contract would have been bought or sold and calculating the number of contracts that would have been used for the futures hedge. (8 marks) b) Calculate the outcome of the futures hedge if, on 30 April 20X7, the spot rate is $1.4100 - 1.4130/ and the price of the relevant futures contract is $1.4000. (10 marks) c) Explain the difference between microhedging and macrohedging for financial institutions. (7 marks)