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You have a receivable of 980,000 hedged with eight futures contracts (125,000 per contract) at a forward price of $1.20/. When you receive the 980,000
You have a receivable of 980,000 hedged with eight futures contracts (125,000 per contract) at a forward price of $1.20/. When you receive the 980,000 and convert it to dollars the spot exchange rate is $1.185/ and at the same time you close your futures contract which is valued at $1.185/. At what effective exchange rate did you convert euros into dollars when you combine the cash position and the hedge position? (Show your work)
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