Question: you expect to receive zar 1000 00000 in 3 months...
You expect to receive ZAR 1000 000.00 in 3 months time but you are worried about adverse movements (a strengthening dollar) in exchange rates and want to hedge against this,
You gather the following information from the foreign exchange market;
Spot exchange rate $1.7640/ ZAR
Three month forward rate $1.7540/ ZAR
Forecast spot exchange rate three months from now $1.7400/ZAR
Show how you can hedge against the currency risk using a forward contract.