How many futures contracts will you need

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Question - You recently sold some goods to an importer in Switzerland and, during the negotiations, you agreed to invoice the goods in francs, knowing that you will need to convert the francs to dol- lars upon receipt. The current exchange rate is $.60 per franc, and the invoice will be for 250,000 francs. Payment is due in 60 days. You decide to hedge your exposure using futures contracts.

-How many futures contracts will you need?  

-Will you create a buy hedge or a sell hedge? 

-What will your spot market position be if the spot exchange rate is $.70 in 60 days? 

-What will your futures contract gain or loss be if the futures rate, which is currently $.63, increases to $.71?

Reference no: EM132950968

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