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Suppose a $/GBP trader believes $ will be likely to appreciate against British pounds in 4 months. She has GBP 5 million to trade. Spot
Suppose a $/GBP trader believes $ will be likely to appreciate against British pounds in 4 months. She has GBP 5 million to trade. Spot rate today is equal to $1.67/GBP. Forward price ( 4 months) is equal to $1.60. The trader sells GBP forward in a 4-month forward contract. Three months have now passed. What is the gain the trader will reap or loss the trader will incur if the spot rate turns out to be $1.68 ? gain; $400,000 gain: $350,000 loss: $400,000 Ioss; $350,000
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