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What should do for ummar

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Ummar is speculating in the movement of USD and EUR. Ummar has USD10 million to begin with, and Ummar must state all profits at the end of any speculation in USD. The spot rate on the euro is USD0.885/EUR, while the 30-days forward rate is USD0.900/EUR. (Note: State all answer in USD)

Problem a) If Ummar believes the euro will continue to slide in value against the U.S. dollar, and he expects the spot rate to be USD0.800/EUR at the end of 30 days, what should he do?

Problem b) If Ummar believes the euro will appreciate in value against the U.S. dollar, and he expects the spot rate to be USD0.950/EUR at the end of 30 days, what should he do?

Reference no: EM132767264

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