Shrewsbury Herbal is an old-line producer of herbal teas, seasonings, and medicines. Shrewsbury Herbal receives a large order today (February 17, 2021), and this time it's from a wholesaler in California, U. S., for $1,500,000. This U. S. wholesaler demands that the order be invoiced in their home currency (i. e., the U. S. dollar) and that delivery be made by the end of May 2021. Mr. Peters approaches you for financial advice. You have just learned how to use currency futures in hedging exchange rate exposure. So you advice Mr. Peters how to hedge its dollar position by entering into IMM futures contracts. The spot rate is $1.67/£ and the June futures price is $1.72/£. The size of a futures contract is £62,500. a. State a hedging strategy using futures contracts.
b. On May 31, 2021 the spot rate turns out to be $1.70/£, while the June futures price is $1.75/£. Calculate Shrewsbury Herbal's net £ gain or loss on its futures position. What is Shrewsbury Herbal's total net revenue for the receivables?