You are German and own a portfolio of U.S. stocks worth $ 1 million . The current spot and 1 - month forward rates are $1 . 1000 / E. Interest rates are equal in both countries . You are worried that the results of the coming U .S. elections in 3 days could lead to a strong depreciation of the dollar . Question 1 : To hedge FX risk for the principal , you face two choices ( 1 ) buy / long choice ? forward $ 1 million , or ( 2 ) sell / short forward $ 1 million . Which is the correct Three days later , your U.S. stock portfolio has gone up to $1 . 02 million . The spot and forward rates are now $1 . 1526 / E . Question 2 : If the portfolio had not been hedged , what is the percentage return ( rate of return ) in euros over the past 3 days ? Question 3 : If the portfolio is hedged , what is the profit on the hedge portfolio in euros ? What is the percentage return on the hedge portfolio in euros