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What action do you need to take to speculate in the forward

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Reference no: EM133332153

Question 1: The current spot exchange rate is $1.75/£ and the three-month forward rate is $1.85/£. You believe that the spot exchange rate will be $1.80/£ in three months.

Question 2: What action do you need to take to speculate in the forward market? What is the expected dollar profit from speculation? Assume that you would like to buy or sell £1,000,000 forward.

Question 3: Diagram the dollar profit schedule (for the forward position you took above) against the future spot exchange rate quoted in American terms.

 

Reference no: EM133332153

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