Contracts should the financial manager take for hedge

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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.

Questions:

What position and How many contracts should the financial manager take for the hedge?

Explain why they should take this position and Why should they have that many contracts.

Type of Position: _____

Why this Position: _____

Number of Contracts: _____

Reference no: EM132041347

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