Question
You enter into a FX forward that buy 1 million EUR with USD in two years when the spot rate is 1.20 (1 EUR =
You enter into a FX forward that buy 1 million EUR with USD in two years when the spot rate is 1.20 (1 EUR = 1.20 USD) and the risk free interest rate in US is 2% and risk free interest rate in UK is 1%. One year later you decide to unwind the trade by entering 1Y forward in opposite direction as before when EUR/USD spot rate is 1.25 (1 EUR = 1.25 USD) and the US risk free rate is still 2% and risk free interest rate in UK is 1.5%. What is your market profit and loss in dollars?
A. +$50000
B. -$67287
C. +$32278
D. +$67287
Step by Step Solution
3.32 Rating (155 Votes )
There are 3 Steps involved in it
Step: 1
Step 12 We have to find the mark to market gain or loss on FX forward position At the tim...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get StartedRecommended Textbook for
Accounting Principles
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
9th Edition
978-0470317549, 9780470387085, 047031754X, 470387084, 978-0470533475
Students also viewed these Finance questions
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
View Answer in SolutionInn App