Compute the profit, Compute the profit from the following:

Compute the profit

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Reference no: EM133251838

Question - An investor believes that the euro will strengthen against the dollar over the next three months and would like to take a position with a value of €250000. He could purchase euros in the spot market at 0.80 $/€ or purchase two futures contracts at 0.83 $/€ with an initial margin of $10000. Compute the profit from the following:

1. Purchasing euros in the spot market if the spot rate in three months is 0.85 $/€.

2. Purchasing euros in the spot market if the spot rate in three months is 0.75 $/€.

3. Purchasing the future contract if the spot rate in three months is 0.85 $/€.

4. Purchasing the future contract if the spot rate in three months is 0.75 $/€.

Reference no: EM133251838

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