Calculate results of using forward and future currency hedge

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Reference no: EM133272613

A company located in the UK may need to advance to its US subsidiary an amount of $15,000,000 at the end of June. The firm believes that the US dollar will strengthen over the next few months, and a currency hedge would be sensible. It is now 1st March. The following data is relevant.

Exchange rates US$/?

1st March spot 1.4461-1.4492;

4 months forward 1.4290-1.4351.

Futures market contract prices

Sterling £62,500 contracts (Contract price $ per £1):

March contract 1.4430

June contract 1.4312

September contract 1.4300

December contract 1.4281

Calculate the results of using forward and future currency hedges if the US$/£ spot exchange rate at the end of June is 1.4505.

Reference no: EM133272613

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