Determine the total dollar amount of profit or loss

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Reference no: EM131195916

IRP and Speculation in Currency Futures Assume that interest rate parity exists. The spot rate of the Argentine peso is $.40.

The 1-year interest rate in the United States is 7 percent versus 12 percent in Argentina.

Assume the futures price is equal to the forward rate. An investor purchased futures contracts on Argentine pesos, representing a total of 1,000,000 pesos.

Determine the total dollar amount of profit or loss from this futures contract based on the expectation that the Argentine peso will be worth $.42 in 1 year.

Reference no: EM131195916

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