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Suppose you own a portfolio of British securities valued at $430,000. The exchange rate is currently at $1 = 0.57. A currency contract on British
Suppose you own a portfolio of British securities valued at $430,000. The exchange rate is currently at $1 = 0.57. A currency contract on British pounds is set at 62,500 pounds. How many contracts must you purchase to protect your portfolio from exchange rate risk? The initial margin on the contract is 10%. What is the return on investment if on closing the exchange rate was $1=0.71
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