Question
Spot rate for EUR today: $1.22 6-month forward rate: $1.30 Contract size: 2,000,000 EUR Case 1: Spot Price after 6 months is 1.10 Case 2:
- Spot rate for EUR today: $1.22
6-month forward rate: $1.30
Contract size: 2,000,000 EUR
Case 1: Spot Price after 6 months is 1.10
Case 2: Spot Price after 6 months is 1.40
- What is the current and future financial obligation (what is given; what is received) for long position? Calculate the profit or loss? Evaluate under the two cases.
- What is the current and future financial obligation (what is given; what is received) for short position? Calculate the profit or loss? Evaluate under the two cases.
| LONG POSITION | ||
| Current Obligation | Future Obligation (Spot price after six months=1.10) | Future Obligation (Spot price after 6 months=1.40) |
| Pay: | Pay: | Pay: |
| Receive: | Receive: | Receive: |
|
|
|
|
|
| Profit/loss: | Profit/loss: |
| SHORT POSITION | ||
| Current Obligation | Future Obligation (Spot price after six months=1.10) | Future Obligation (Spot price after 6 months=1.40) |
| Pay: | Pay: | Pay: |
| Receive | Receive: | Receive: |
|
|
|
|
|
| Profit/loss: | Profit/loss: |
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Investments An Introduction
Authors: Herbert B Mayo
10th Edition
0538452099, 9780538452090
