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Will the investor make a gain-loss

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Question - An investor enters into a short 1 months' forward contract to sell 100,000 British pounds for US dollars. Use the rates in the table to indicate what position the investor will take and calculate the gain/loss of the transaction.

Table Spot and forward quotes of the USD/GBP exchange rate

Maturity Bid Offer

Spot 1.2732 1.2736

1-month forward 1.2746 1.2751

3-month forward 1.2772 1.2777

1-year forward 1.2883 1.2889

Required -

-If the exchange rate at the end of the contract is 1.24 the investor is obligated to buy/sell pounds?

-If the exchange rate at the end of the contract is 1.24 the investor will invest in pounds at a price of how much when they are worth 1.24? Will the investor make a gain/loss? The gain/loss of the transaction is how much in $?

-If the exchange rate at the end of the contract is 1.34 the investor is obligated to buy/sell pounds?

-If the exchange rate at the end of the contract is 1.34 the investor will invest in pounds at a price of how much when they are worth 1.34? Will the investor make a gain/loss? The gain/loss of the transaction is how much in $?

Reference no: EM133004491

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