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Assume you take a long GBP position with the maturity of 1 Year at the following forward rate: F1USD/GBP = 1.51. Assume the contract amount
Assume you take a long GBP position with the maturity of 1 Year at the following forward rate: F1USD/GBP = 1.51. Assume the contract amount is: AUSD = 2,000,000. Todays USD/GBP spot rate is: X0USD/GBP = 1.55. The 1-Year interest rates for GBP is 3%; the USD 1-Year interest rate is 5%. After one year the forward contract matures. Assume that the USD/GBP spot exchange rate at t = 1 is: X1USD/GBP = 1.58. What is your loss/gain of the forward contract?
A. Gain of USD 61,349.69
B. Loss of USD 61,349.69
C. Gain of USD 92,715.23
D. Loss of USD 92,715.23
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