Question
Suppose that you are a currency speculator for Barclays Bank, who is authorized to trade 25,000,000 in the spot market and forward market. The current
Suppose that you are a currency speculator for Barclays Bank, who is authorized to trade 25,000,000 in the spot market and forward market. The current spot rate of the Euro (EUR) against the Japanese Yen (JPY) is 131.060/ , and the 30-day forward rate is 135.500/ . You expect the Euro to depreciate against the Japanese Yen to 125.10/ in 30 days.
a. Explain and calculate the expected profit/loss from speculation in the spot market.
b. Explain and calculate the expected profit/loss from speculation in the forward market.
c. Discuss two advantages and two disadvantages of speculation in the forward market over speculation in the spot market.
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Money Management And Financial Budgeting 2 Books In 1 A Beginners Guide On Managing Bad Credit Debt Savings And Personal Finance
Authors: Robert Anderson
1st Edition
1386959006, 978-1386959007
