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Assume that a March futures contract on Australian dollar was available in January for 79.90 per unit. Also assume that forward contracts were available for
Assume that a March futures contract on Australian dollar was available in January for 79.90 per unit. Also assume that forward contracts were available for the same settlement date at a price of 80.78 per Australian dollar. How could speculators capitalise on this situation, assuming zero transaction costs? How would such speculative activity affect the difference between the forward contract price and the futures price?
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