Find out the annualized profit rate

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a. Suppose you buy (go long) a Euro Future contract today at S(t) =1.12 (dollars per Euro) and that in one month the exchange rate will be S(T) = 1.20. Note that the size of a Euro Futures Contract is 125,000 Euro.

b. Suppose you need to deposit $5,000 to satisfy the margin requirement with the broker. What will be your annualized profit rate for such trade if you use monthly compounding? How about if you use continuous compounding?

Reference no: EM133078392

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