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Your company will receive 10 million euro from a product sale in France in 6 months. You are concerned about declining Euro vs USD exchange
Your company will receive 10 million euro from a product sale in France in 6 months. You are concerned about declining Euro vs USD exchange rate in 6 months and like to lock in the exchange rate now. Each Euro futures contract is worth 125,000 Euro. Euro rate currently is 1.3850/USD. A Euro futures contract with six months to expiration is at 1.3840. 1) You decide to sell the euro futures to hedge the currency risk. Six months later, Euro depreciates to 1.3750. A) How many contracts you will be selling? B) What's the loss on your Euro sales? C) What's the gain on the futures contract
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