(Solved): Today is 1 January 2023. The current spot rate is US$1.71110/. ABC Plc., a UK company, has a US $6 ...

Today is 1 January 2023. The current spot rate is US$1.71110/£. ABC Plc., a UK company, has a US

invoice to pay on 25 April 2023. ABC is concerned that exchange rate fluctuations could increase the

cost and, hence, seek to effectively fix the £ cost using currency futures. The futures' contract size is

and the following futures prices are available: March expiry June expiry September expiry US$1.71205/£ US$1.71035/£ US$1.70865/£ Required: a) Set up the hedge (Hint: Round the contract numbers to the nearest whole number). (4 Marks) b) Compute the result of using the currency futures hedge on

April 2023, if the applicable currency future is trading at US$1.65750/£ and the spot rate is US$1.65770/£. (9 Marks) (2 Marks) c) Calculate the hedging efficiency