for the 0.43, wouldnt it be better to purchase at forward rate then sell it? 10,000,000/0.4050*0.43 for the 0.38, wouldnt it be better to buy at the spot 30 days in the future (at 0.38), then sell it at the forward rate? 10,000,000/0.38*0.4050.

Ian is once again speculating on the movement of currencies. Ian has A$10 million to begin withand he must state all profits at the end of any speculation in Australian dollars. The spot rate on the euro is A$0.4100/, while the 30-day forward rate is A$0.4050/ a. If Ian believes the euro will continue to rise in value against the Australian dollar, so that he expects the spot rate to be $0.4300/ at the end of 30 days, what should he do? b. If Ian believes that the euro will depreciate in value against the Australian dollar, so that he expects the spot rate to be $0.3800/ at the end of 30 days, what should he do? Values Assumptions Initial investment (funds available) Current spot rate (A$/euro) 30-day forward rate (A$/euro) Expected spot rate in 30 days (A$/euro) A$10,000,000 ASO.4100 AS0.4050 AS0.4300 b) Values A$10,000,000 AS0.4100 AS0.4050 ASO.3800 Strategy for Part a): 1. Sell euros 30-days forward (in euros) 2. At the end of 30 days, buy these euros spot 3. At the end of 30 days, sell euros at forward rate 4. Realize profit 24,691,358.02 (A$9,382,716) A$10,000,000 AS617,284 Strategy for Part b): 1. Convert A$ to euros at the current spot rate (A$) in euros) 2. At the end of 30 days, convert back to A$ at spot rate 3. Realize profit (A$10,000,000) 24,390,243.90 AS10,487,805 AS487,805 Ian is once again speculating on the movement of currencies. Ian has A$10 million to begin withand he must state all profits at the end of any speculation in Australian dollars. The spot rate on the euro is A$0.4100/, while the 30-day forward rate is A$0.4050/ a. If Ian believes the euro will continue to rise in value against the Australian dollar, so that he expects the spot rate to be $0.4300/ at the end of 30 days, what should he do? b. If Ian believes that the euro will depreciate in value against the Australian dollar, so that he expects the spot rate to be $0.3800/ at the end of 30 days, what should he do? Values Assumptions Initial investment (funds available) Current spot rate (A$/euro) 30-day forward rate (A$/euro) Expected spot rate in 30 days (A$/euro) A$10,000,000 ASO.4100 AS0.4050 AS0.4300 b) Values A$10,000,000 AS0.4100 AS0.4050 ASO.3800 Strategy for Part a): 1. Sell euros 30-days forward (in euros) 2. At the end of 30 days, buy these euros spot 3. At the end of 30 days, sell euros at forward rate 4. Realize profit 24,691,358.02 (A$9,382,716) A$10,000,000 AS617,284 Strategy for Part b): 1. Convert A$ to euros at the current spot rate (A$) in euros) 2. At the end of 30 days, convert back to A$ at spot rate 3. Realize profit (A$10,000,000) 24,390,243.90 AS10,487,805 AS487,805