Kapinsky Capital Geneva (A). Christoph Hotfeman trades currency for Kapinsky Capital of Geneva. Christoph has $10 million to begin with, and he must state all profits at the end of any speculation in U.S. dollars. The spot rate on the euro is $1.3355/, while the 30-day forward rate is $1.3352/. a. If Christoph believes the euro will continue to rise in value against the U.S. dollar, so that he expects the spot rate to be $1.3600/ at the end of 30 days, what should he do? b. If Christoph believes the euro will depreciate in value against the U.S. dollar, so that he expects the spet rate to be $1.2800/ at the end of 30 days, what should he do? a. If Christoph believes the euro will continue to rise in value against the U.S. dollar, so that he expects the spot rate to be $1.3600/ at the end of 30 days, what should he do? (Select the best choice below.) A. In this case, Christoph believes the dollat will be trading at $1.3600/ in the open market at the end of 30 days, but he has the ability to buy of sell dollars at a forward raie of $1.3352/6. He should therefore buy euros forward 30 days (requires no actual cash flow up front), and at the end of 30 days take delivery of those euros and sell in the spot market at the higher dollar rate for profit. B. In this case, Christoph believes the dollar will be trading at $1.3600/ in the open market at the end of 30 days, but he has the ability to buy or seil dollars at a torward tate of $1.2800/. He should therefore buy euros forward 30 days (requires no actual cash flow up front), and at the end of 30 days take delivery of toose euros and sell in the spot market at the higher dollar rate for profit. C. In this case. Christoph believes the dollar will be trading at $1.3352/ in the open market at the end of 30 days, but he has the ability to buy or sell dollars at a forward rate of $1.3600/. He should therefore buy euros forward 30 days (requires no actual cash flow up front), and at the end of 30 days take delivery of those euros and sell in the spot market at the higher dollar rate for profit. D. In this case, Christoph believes the dollar will be trading at $1.2800/ in the open market at the end of 30 days, but he has the ability to buy or sell dollars at a fonvard rate of $1.3352/. He should therefore buy euros forward 30 days (requires no actual cash flow up front), and at the end of 30 days take delivery of those euros and sell in the spot market at the higher dollar rate for profit. b. If Christoph believes the euro will depreciate in value against the U.S. dollar, so that he expects the spot rate to be $1.2800/E at the end of 30 days, what should he do? (Select the best choice below.) A. Since Christoph beleves that the dollar will strengthen to $1.3600/ in 30 days, he should sell euros forward now at the higher dollar rate, wair 30 days and buy the euros needed on the open market at $1.2800/, and immediately then use those euros to fuifill his forward contract to sell euros for dollars at $1.3352/ for a profit. B. Since Christoph believes that the dollar will strengthen to $1,2800/ in 30 days, he should sell euros forward now at the higher dollar rate, wait 30 days and buy the euros needed on the open market at $1.2800/, and immediately then use those euros to fulfit his forward contract to sell euros for dollars at $1.33521 for a profit. C. Since Chirstoph believes that the dollar will strengthen to $1.2800/ in 30 days, he should sell euros forward now at the higher dollar rate, wait 30 days and buy the euros needed on the open market at $1.2800/, and immediately then use those euros to fulfill his forward contract to sell euros for dollars at $1.3600/ for a profit. D. Since Christoph believes that the dollar will strengthen to $1.3352/ in 30 days, he should sell euros forward now at the higher dollar rate, wait 30 days and buy the euros needed on the open market at $1.2800/, and immediately then use those euros to fulfill his forward contract to sell euros for doliars at $1.3600/ for a profit
