INSTRUCTIONS

Assume today's settlement price on a CME EUR futures contract is $$1\mathrm{.}3140.$ You have a short position in one contract. Your

performance bond account currently has a balance of $$1,700.$ The next three days' settlement prices are $$1\mathrm{.}3126,$$$1\mathrm{.}3133,$

and $$1\mathrm{.}3049.$ Calculate the changes in the performance bond account from daily marking$-$to$-$market and the balance of the

performance bond account after the third day.

where EUR $125,000$ is the contract size of one EUR contract.

Do problem $1$ again assuming you have a long position in the futures contract.

where EUR $125,000$ is the contract size of one EUR contract.

Note that the June $2019$ Mexican peso futures contract has a price of $$0\mathrm{.}05143$ per MXN$.$ You believe the spot price in June will be

$$0\mathrm{.}05795$ per MXN$.$ What speculative position would you enter into to attempt to profit from your beliefs? Calculate your anticipated

profits, assuming you take a position in three contracts. What is the size of your profit $($loss$)$ if the futures price is indeed an unbiased

predictor of the future spot price and this price materializes?

where MXN$500,000$ is the contract size of one MXN contract.

Suppose you took a long position on a put option with an exercise price of $$\frac{1\mathrm{.}45}{?}$ pound and paid a premium of &$\frac{0\mathrm{.}10}{?}$ pound $.$ On the

maturity date, the spot exchange rate turns out to be $$\frac{1\mathrm{.}60}{?}$ pound. Will you exercise this option? Is the put option in$-,$ at$-,$ or out$-$of$-$the$-$

money at maturity? What if the spot rate at maturity turns out to be $$\frac{1\mathrm{.}40}{?}$ pound $?$ Will you exercise this option, and is the contract in$-,$ at$-,$

or out$-$of$-$the$-$money?

You purchased a call option on euros with a strike price of $$\frac{1\mathrm{.}10}{?}$ Euro $.$ The call option premium was $$\frac{0\mathrm{.}08}{?}$ Euro $.$ Is your call option in$-$

the$-$money if euros are trading at in the spot market at maturity? Will you exercise your call option or let it expire? Alternatively, if the spot

rate at maturity is $$\frac{1\mathrm{.}20}{E}UR,$ will you exercise this option?