You buy euros forward against dollars one-year in the amount of 10 million EUR. The spot exchange rate is 1.2000. The interest rates are 5% and 4% for dollars and EUR, respectively for one-year settlement.

• What is the initial forward outright?

• What will the forward contract be worth in 6 months if spot is 1.2100 and the interest rates are 5.5% and 4.0% for dollars and EUR, respectively for 6 month settlement?

• What is the delta of the forward contract at the six-month date?

• How large of a spot position would it take to hedge the forward at the six-month date?