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The US$/European € spot rate is currently 1.9612-1.9618 $/€.
3 month forward rate is quoted at $0.0012-0.0006 premium in Europe. A US company is expecting to receive €2.5 mil in 3 months time and would like to hedge this using forward contract.
US$ in 3 months time =?
The answer given is €2.5mil/1.96 =$1,275,510.
Shouldn’t it be €2.5milx1.96= $4.9mil?
Thanks in advance.
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