Betting on changes in the foreign currency exchange market

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Reference no: EM131993494

1. Judy is a currency speculator who enjoys "betting" on changes in the foreign currency exchange market. Currently the spot price for the Japanese yen is ¥129.87/$ and the 6-month forward rate is ¥128.53/$. Judy thinks the yen will move to ¥128.00/$ in the next six months. If Judy's expectations are correct, then she could profit in the forward market by ________ and then ________.

a. She could not profit in the forward market.

b. There is not enough information to answer this question.

c. buying yen for ¥128.53/$; selling yen at ¥128.00/$

d. buying yen for ¥128.00/$; selling yen at ¥128.53/$

2. If the spot rate is JPY129.87/USD and the 6 month forward rate is JPY128.53/USD, then the 6-month yen is selling at a forward ________ of approximately ________ per annum.

a. premium; 2.09%

b. premium; 2.06%

c. discount; 2.06%

d. discount; 2.09%

Reference no: EM131993494

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