Stefan Boerig of Hoffman Bank now believes that the Swiss franc (CHF) will appreciate against the British pound in the coming 3-month period. He has GBP250,000 to invest. The current spot rate is GBP0.7829 = CHF1.00, the 3-month forward rate is GBP0.7640 = CHF1.00, and he expects the spot rates to reach GBP0.7995 = CHF1.00 in three months.

a. Calculate Stefan’s expected profit, assuming a pure spot market speculation strategy.

b. Calculate Stefan’s expected profit, assuming he buys or sells Swiss francs three months forward.