Unit Costs of EUROs and USDs Please help with the following problem Please provide step by step calc

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Unit Costs of EUROs and USDs

Please help with the following problem Please provide step by step calculations

A US importer is concerned about the appreciation of Euro

against USD due to Euro payables of EUR10,000,000 in three months  To hedge

(protect himself/herself) the position, exporter decides to use futures

markets Currently, CME (Chicago Mercantile Exchange) EURO contracts (125,000

each) are traded at USD10814 The spot rate is EUR/USD10751-0756 (USDs per

EURO) Suppose the exporter takes an equal futures position to its cash market

position (EUR10m) at $10814  Provided that futures contract price and spot

rates are $11250/Euro and $10935/Euro respectively when the hedge is

liquidated, what should be the unit cost of EURO for the US importer in USD

terms

 
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