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On September 15, you sold 8 million British pounds (GBP) forward against Norwegian krone at a forward rate of NOK 10.7210/ with a maturity of
On September 15, you sold 8 million British pounds (GBP) forward against Norwegian krone at a forward rate of NOK 10.7210/ with a maturity of three months. On December 15, at the expiration date of your contract, the British pound trades at NOK 10.5050/. Interest rates in the U.K. are equal to 4% per year, while the interest rate in Norway is 2% per year. What is the profit or loss realized by your forward position?
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