Calculate the spot opportunity loss or gain for the company

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In March, a company in the US is anticipating to pay 1,250,000 Euros in May to its European customers and wants to hedge against a rise in the value of the Euro relative to the US dollar in June. At this time the spot exchange rate Euro is $1.2280 USD. The CME Group future settle rate for a May Euro FX futures contacts is 1 Euro=$1.2350 US Dollars, with each futures contract for 125,000 Euros per contract.

Suppose in May the spot rate for the Euro changed to $1.2758 US Dollars and the Euro futures FX price changed to $1.2828 US Dollars. Calculate the spot opportunity loss or gain for the company and the futures gain or loss.

What is the net hedging result?

Spot Gain or Loss: _____

Future Gain or Loss: _____

Net Hedging Result: _____

Type of Position: _____

Why this Position: _____

Reference no: EM132044280

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