Question
1. Assume that the three month FR = $2.00/1 and a speculator believes that the spot rate in three months will be SR = $2.05/1.
1. Assume that the three month FR = $2.00/1 and a speculator believes that the spot rate in
three months will be SR = $2.05/1. How can a person speculate in the forward market? How
much will the speculator earn if he or she is correct?
2. If the speculator of Problem 2 believes that the spot rate in three months will be SR =
$1.95/1, how can he or she speculate in the forward market? How much will the speculator
earn if he or she is correct? What will the result be if in three months SR = $2.05/1 instead?
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Principles of Macroeconomics
Authors: Karl E. Case, Ray C. Fair, Sharon E. Oster
12th edition
134078802, 978-0134078809
