You have to make a 90,000,000 payment in Japanese Yen on close of business day, Friday, September 7th. You decide to hedge your risk with the futures contracts. Assume you that you enter into the futures position at a close of day on Tuesday, September 4th. Futures and spot data are provided in the file HW1_data.doc. Contract size is 12,500,000 yen.

a.Describe the position you decide to enter (long or short).

b.Describe the contract (what month, and what quantity).

c.Document the gain or loss due to marking to market every day that your position is open.

d.What is the total cost in US$ after you have closed out your futures positions, and made your payment?

e.What would have been the total cost in US$, if you had not hedged? Did you benefit from hedging?

f.Repeat steps a) e) assuming that you expect a payment of 900,000 British pounds on close of business day, Friday, September 7th. Assume you that you enter into the futures position at a close of day on Tuesday, September 4th. Futures and spot data are provided in the file HW1_data.doc. Contract size is 62,500 British pounds.

British Pound Data Daily Settlements for British Pound Future Date: W 09/05/2018 Change Settle Estimated| Prior Day Volume Interest Month OpenHighLoLast Open SEP 18 1.2858 1.29892791.291300411.2903 190,915 245,326 OCT : .288 .299 1.2822 292 t.0041. 2919 736 NOV 181.30151.3015 1.2995 1.2995 +0042 1.2939307 DEC 18 1.2914 .3039B 1.2844A1.2964 |0041.29558,845 JAN 19 MAR 19 1.29321.3055 1.2930 1.3055 +0042 1.3016 646 1,085 13,401 0041 1.2974 20 1,172 Daily Settlements for British Pound Futures Date: Friday, 09/07/2018 Settle Estimatedl Prior Day Volume |Interest Month OpenHighLoLast Change Settle Open SEP 18 2934 1.3032 1.2911 1.2920B -0010 1.2928 150,787234,276 OCT 1 2947 303 .294 .294 .001 2944 274 NOV 181.29751.3042B1.2959 1.29590010 1.2964 DEC 18 1.2976 .3083 1.2965 1.2974.0010 1.298010,935 JAN 19 MAR 19 1.3108 1.3108 1.3100A 13100A0009 1.3042 447 1,055 21,670 40 -.0010 1.2999 1,172 Spot Data: YYYY/MM/DDNdy|USD/GBP udRaxrr 2458366 2018/09/04 Tue 1.2843 2458367 2018/09/05 Red 1.2909 2458368 2018/09/06 Th 1.2938 2458369|2018/09/07|Fri| 1.2943