The treasurer of EasyJet Plc (US) based in the US has identified the need to pay a UK supplier 25 million in five months time. The treasurer has decided to use exchange-traded currency futures to hedge the foreign exchange risk:

• Contract size 200,000.
• Prices given in USD per (that is 1 = ....)
• Tick size USD 0.0001 or USD 20 per contract.

Date /$

Spot 1.5200

Three-month expiry 1.5600

Six-month expiry 1.5756

Assume that basis points are time-variant and considered in the hedging.

Required:

Use the hedge explained above to estimate the expected payment by EasyJet Plc Sell usd to by pound.