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A&M Co. purchases a futures contract specifying GBP100,000 with the June settlement date. This futures contract is priced at C$1.68/GBP. On February 1st, A&M realizes
A&M Co. purchases a futures contract specifying GBP100,000 with the June settlement date. This futures contract is priced at C$1.68/GBP. On February 1st, A&M realizes that it has no need for GBP in June. It thus sells a futures contract specifying GBP100,000 with the June settlement date. This futures contract is priced at C$1.63/GBP. What is the result of these transactions to A&M Co.? (Points : 3.5) |
A&M Co. incurs a loss of GBP5,000. A&M Co. incurs a profit of C$5,000. A&M Co. incurs a profit of GBP5,000. A&M Co. incurs a loss of C$5,000. (C$1.63/GBP-C$1.68/GBP) x GBP100,000 = -C$5,000.
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