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QUESTION 2 (25 MARKS) (a) Suppose a trader takes a position on June 5th 2021, in one September 2021 EURO (EUR) future contract at USD1.3094/EUR.
QUESTION 2 (25 MARKS) (a) Suppose a trader takes a position on June 5th 2021, in one September 2021 EURO (EUR) future contract at USD1.3094/EUR. The trader holds the position until the last day of trading when the spot price is USD 1.2939/EUR. This will be the final settlement price because of price convergence. The trader has EUR125,000 for this investment. (0) If the trader had a long position and he was a speculator, calculate his profit or loss for the position above. (2 marks) (ii) If the trader had a short position and he was a speculator, calculate his profit or loss for the position above. (2 marks) (iii) If the trader had a long position and he was a hedger, calculate his profit or loss for the position above. (3 marks) (iv) If the trader had a short position and he was a hedger, calculate his profit or loss for the position above. (3 marks) QUESTION 2 (25 MARKS) (a) Suppose a trader takes a position on June 5th 2021, in one September 2021 EURO (EUR) future contract at USD1.3094/EUR. The trader holds the position until the last day of trading when the spot price is USD 1.2939/EUR. This will be the final settlement price because of price convergence. The trader has EUR125,000 for this investment. (0) If the trader had a long position and he was a speculator, calculate his profit or loss for the position above. (2 marks) (ii) If the trader had a short position and he was a speculator, calculate his profit or loss for the position above. (2 marks) (iii) If the trader had a long position and he was a hedger, calculate his profit or loss for the position above. (3 marks) (iv) If the trader had a short position and he was a hedger, calculate his profit or loss for the position above
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