7. Gnome Capital (B). Stefan Weir believes the Swiss franc will appreciate versus the U.S. dollar in the coming three-month period. He has $100,000 to invest. The current spot rate is $0.5820/SF, the three- month forward rate is $0.5640/SF, and he expects the spot rates to reach $0.6250/SF 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 SF three months forward.