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The current spot exchange rate is $1.53/pound and the three-month forward rate is $1.50/pound. Based on your analysis of the exchange rate, you are confident that the spot exchange rate will be $1.55/pound in three months. Assume that you would like to buy or sell $1,000,000.

a. What actions do you need to take to speculate in the forward market?

b. Is the dollar at a forward premium or discount? Explain your answer

Financial Management, Finance

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