The present spot exchange rate is 1.55pound and the 3m, Ask an Expert

Economics

Important information about Spot-forward exchange rates

The current spot exchange rate is $1.55/£ and the 3M forward rate is $1.50/£. On the basis of your analysis of the exchange rate, you are pretty sure the spot will be $1.52/£ in 3M time. Assume that you'd like to buy or sell £1million.
a) what actions do you need to take to speculate in the forward market? What is the expected dollar profit?
b)If in 3M the spot turns out to be $1.46/£, what is your profit/loss in dollar terms?

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Macroeconomics, Economics

Category:- Macroeconomics
Reference No.:- M9208389

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