Christoph Hoffeman trades currency for RiverRock Capital of Geneva. Christoph has USD10 million to begin with, and he must state all profits at the end of any speculation while the 30-day forward rate is USD1.3350 = EUR1.00.

a.  If Christoph believes the euro will continue to rise in value against the U.S. dollar and expects the spot rate to be USD1.3600 = EUR1.00 at the end of 30 days, what should he do?

b.  If Christoph believes the euro will depreciate in value against the U.S. dollar and expects the spot rate to be USD1.2800 = EUR1.00 at the end of 30 days, what should he do?

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Assumptions Initial investment (funds available) Current spot rate (USD=EUR1.00) 30-day forward rate (USD=EUR1.00) Expected spot rate in 30 days (USD-EUR1.00) a. Values $10,000,000 $1.3358 $1.3350 $1.3600 b. Values $10,000,000 $1.3358 $1.3350 $1.2800