1. Business
  2. Economics
  3. 2 on january 10 volkswagen agrees to import auto parts...

Question: 2 on january 10 volkswagen agrees to import auto parts...

Question details

2. On January 10, Volkswagen agrees to import auto parts worth $ 7 million from the United States. The parts will be delivered on March 4 and are payable immediately in dollars. VW decides to hedge its dollar position by entering into CME future contracts. The spot rate isS 0.8942 per euro, and the March futures price is $ 0.9002 per euro. A. Calculate the number of futures contracts that VW must buy to offset its dollar exchange risk on the parts contract. B. On March 4, the spot rate turns out to be $ 0.8952 per euro, while the March futures price is S 0.8968 per euro. Calculate VWs net euro gain or loss on its futures position. Compare this figure with VWs gain or loss on its unhedged position.
Solution by an expert tutor
Blurred Solution
This question has been solved
Subscribe to see this solution