An investor enters into a short forward contract to sell 50,000 for U.S. dollars at an exchange rate of 110/$1.

a) How much does the investor gain or lose if the exchange rate at the end of the contract is 108/$1? (20 points)

b) Did appreciate or depreciate against $ in part a)?

c) Why do you think that the investor is entering into a short forward contract to sell 50,000?

d) How much does the investor gain or lose if the exchange rate at the end of the contract is 112/$1?