Discuss the relationship between the spot and forward rate

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Reference no: EM131850120

Consider the following data for the British Pound.

£ = $1.40 on the spot market. The 90-day Forward rate is £ = $1.35. I am expecting to pay £5,000,000 in 90 days. Show how I can hedge using this Forward market.

Why might I choose not to hedge?

Discuss the relationship between the spot and forward rate.

What is the difference between the futures market and the Forward market? What is meant by the argument that options provide flexibility?

Reference no: EM131850120

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