Qantas hedges a $2\mathrm{.}5$ million receivable by selling Euro forward. If the spot rate is $1=$ $$1\mathrm{.}6153$ and the $90$day forward rate is $$1\mathrm{.}5810,$ what is Qantas' cost of hedging?

Question $9$Answer

a$.$

$$4,038,250$

b$.$

$$3,952,500$

c$.$

$$85,750$

d$.$

Qantas will make profits from hedging positions

e$.$

We don't know. The cost of hedging is unknown at the time Qantas enters into its hedge