On February 15, BMW agrees to import engine components worth $8 million from the United States. The components will be delivered on March 20 and are payable immediately in dollars. BMW decides to hedge its dollar exposure by entering into IMM futures contracts. The spot rate on February 15 is $0.9020/€ and the March futures price is $0.9085/€. On March 20, the spot rate turns out to be $0.9035/€, while the March futures price is $0.9057/€. Calculate BMW's net dollar gain or loss on its futures position. [Note: Euro contract size = €125,000]
Question 6Answer
a.
Loss $13,125
b.
Gain $24,500
c.
Gain $22,400
d.
Gain $32,375