Calculate fair price for six month forward contract

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Reference no: EM131981789

(a) The spot rate is $1 = 2.238 BRL (Braxilian Real). If the one year risk-free rate in the U.S. is 2% and the one year risk-free rate in Brazil is 5%, calculate a fair price for a six month forward contract.

(b) There is a six-month futures contract available where each contract is for the purchase of 100,000 BRL using dollars. If the quote for the six month BRL/USD futures contract is .30315 calculate and show the details of how you would make arbitrage profits.

Reference no: EM131981789

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