What range would you predict the eur to be in one month

Reference no: EM132465957

If the Spot rate on the EUR is $1.0913/€ and the historical statistics tell us that the monthly returns on the EUR are normally distributed, with mean and standard deviation of "-2.5%" (since the EUR has been depreciating) and 6%, respectively, then what would be your prediction of the EUR rate one month later? With 95% confidence, what range would you predict the EUR to be in one month?

Say, the Forward market rates are such that 1-month EUR contracts are trading at $1.05/€. How would you trade against this Forward contract? Specify whether you will buy or sell the EUR forwards (go long or short?)

Reference no: EM132465957

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