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A UK company purchased goods for €870,000 in December, which it must pay for in May. It wishes to hedge its exposure to risk using futures. The spot rate when the goods were purchased is £0.7161/€. The price of euro June futures at the same time is £0.7180/€. Euro futures are for €100,000, they are priced in £ per €1 and the size of a tick is £0.0001and the value of a tick is £10.
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How might the company use currency futures to establish a hedge for the currency exposure?
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