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Your firm is US based with the majority of its business being conducted in US$. However, you expect to pay a Euro-zone based supplier EUR
Your firm is US based with the majority of its business being conducted in US$. However, you expect to pay a Euro-zone based supplier EUR 1 million in 1-year. The current spot rate is $0.9375/EUR. You wish to hedge your exposure using the 1-year forward foreign currency contract which sells for $1.00/EUR. Each forward contract is for 125,000 Euros. What should you do?
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Buy 7 contracts of the $/EUR forward
Sell 7 contracts of the $/EUR forward
Buy 8 contracts of the $/EUR forward
Sell 8 contracts of the $/EUR forward
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