Assume a speculator anticipates that the spot rate of the franc in three months will be lower

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Assume a speculator anticipates that the spot rate of the franc in three months will be lower than today’s three-month forward rate of the franc, $0.50 = 1 franc.

a. How can this speculator use $1 million to speculate in the forward market?

b. What occurs if the franc’s spot rate in three months is $0.40? $0.60? $0.50?

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International economics

ISBN: 978-8131518823

13th Edition

Authors: Robert J. Carbaugh

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Question Posted: Nov 14, 2012 03:36 AM

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Assume a speculator anticipates that the spot rate of the franc in three months will be lower

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a The US speculator should sell francs today for delivery in 6 months at tod...View the full answer

International economics

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