How many futures contracts should the us multinational buy

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On September 11, a U.S.-based MNC with a customer in Singapore expects to receive S$3 million. The current spot exchange rate is $0.5950/S$. The transfer will occur on December 10. The current S$ futures price for December delivery is $0.6075/S$. The size of the CME futures contract is S$125,000. How many futures contracts should the U.S. multinational buy or sell in order to minimize the variance of the hedged position? What is the MNC's net profit (or loss) on December 10 if the spot rate on that date is $0.5900/S$?

Reference no: EM13871881

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