The pound spot rate is pound100180 and the 1-year forward

Assignment Help Corporate Finance

Reference no: EM13363679

the £/$ spot rate is £1.00/$1.80 and the 1-year forward rate is also £1.00/$1.80. You expect the spot £/US$ rate to be £1.00/$1.65 in 1-year's time. You have $ 1,000,000 to speculate with.

1. Do you buy or sell £1,000,000 in the forward market? If so, why?

2. Find what is your profit in £s if you are correct and the spot rate is £1.00/US$1.65 in a year's time?

3. Find what is your profit or loss in £s if you are wrong and the spot rate is £1.00/$2.00?

Reference no: EM13363679

Questions Cloud

1 in late 2000 lucent announced that revenues would be : 1. in late 2000 lucent announced that revenues would be adjusted downwards by 679 million as a result of revenue

What are the reasons for a firm having lower cash from : what are the reasons for a firm having lower cash from operations than working capital from operations? what are the

In 2005 ibm had a return on equity of 267 percent whereas : in 2005 ibm had a return on equity of 26.7 percent whereas hewlett-packards return was only 6.4 percent. use the

The cigarette industry is subject to litigation for health : the cigarette industry is subject to litigation for health hazards posed by its products. the industry has been

The pound spot rate is pound100180 and the 1-year forward : the pound spot rate is pound1.001.80 and the 1-year forward rate is also pound1.001.80. you expect the spot poundus

Three months ago you purchased at par a 100000 bond with a : three months ago you purchased at par a 100000 bond with a stated interest rate of 5. today the federal reserve

Consider the following hypothetical facts about mexico the : consider the following hypothetical facts about mexico the peso recently lost over 40 of its value relative to the

Simple budget flexible budget actual resultsrevenues 47 48 : simple budget flexible budget actual resultsrevenues 4.7 4.8 4.5costs 4.1 4.1 4.2profit 0.6 0.7 0.3a. evaluate and

Predict one major change in the financial environment that : predict one major change in the financial environment that may likely to occur within the next five years. its impact

User Account

All Pages