Question $3$

A speculator observes that the yen$-$dollar $12$ month forward exchange rate is yen $\frac{90}{\text{\$}}1$

and expects the spot yen$-$dollar exchange rate to be yen $\frac{80}{\text{\$}}1$ in a year's time. The

speculator buys or sells $$1$ million forward today. Assume that the speculator is proved

wrong and the spot exchange rate is yen $\frac{100}{\text{\$}}1$ in a year's time. Then the speculator will

have:

A$)$ sold dollars forward and made a loss of yen$10,000,000$

B$)$ sold dollars forward and made a loss of $$111,111$

C$)$ bought dollars forward and made a loss of yen$10,000,000$

D$)$ bought dollars forward and made a loss of $$111,111$