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Problem regarding the treasurer expectation

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A German company is exporting some equipment to the United States and will receive payment of US$1 million three months from now. The current spot exchange rate is$1.25/€. The treasurer of the company expects the dollar to depreciate in the next few weeks,and is concerned about it. The three-month forward rate is $1.28/€.

(a) Given the treasurer's expectation, what action can he take using the forward contract?

(b) Three months later, the spot exchange rate turns out to be $1.30/€. Did the company benefit because of the treasurer's action?

Reference no: EM131069043

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