2. Suppose that today the 90-dayfutures contract on the Canadian dollar is available for $.90 per Canadian dollar, while forward contracts were available for the same settlement date at a price of $.92 per Canadian dollar.

a. What profits per unit could speculators earn, assuming zero transaction costs?

b. How would the speculative activity described above affect the difference between the forward contract price and the futures price overt time?

A. This opportunity to earn speculative profits is likely to last for a fairly long time.

B. This opportunity to earn speculative profits should last until something significant happens to change the supply and demand for these currencies.

C. This opportunity to earn speculative profits likely will last only a very short time.

D. Government regulators will likely prosecute anyone taking advantage of this speculative opportunity.