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Exchange Rate Speculation Suppose one year dollar pound(P) futures contracts are currently trading at F_$/P = 2.00, but you believe that the Bank of England is going to lower interest rates. This expectation is different than the expectations of the market. Is your expectation about the future spot rate higher or lower than the market's expectations about the future spot rate. Explain your answer. Exchange Rate Speculation (cont.) Suppose you purchased futures contracts at the rate in the previous question, and the spot rate turned out to be E_$/P = 1.25. Starting with $1, describe how you could use this price difference to make a profit. Exchange Rate Speculation Suppose one year dollar pound(P) futures contracts are currently trading at F_$/P = 2.00, but you believe that the Bank of England is going to lower interest rates. This expectation is different than the expectations of the market. Is your expectation about the future spot rate higher or lower than the market's expectations about the future spot rate. Explain your answer. Exchange Rate Speculation (cont.) Suppose you purchased futures contracts at the rate in the previous question, and the spot rate turned out to be E_$/P = 1.25. Starting with $1, describe how you could use this price difference to make a profit