the current USD/EUR rate of 1.22. a) 100% of the total costs with 100% hedge with forward contracts If the future spot price is equal to the forward price of 1,22USD/EUR and the company fully hedges with forward contracts, it will neither loss, nor win. The next scenario considers the case of a dollar price of 1,48USD/EUR. Since the forward price is lower than the future spot price, the company will gain the difference of (1,48-1,22)*25 000 000, thus a 6 500 000$ gain. (Exhibit 1) The last scenario…
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