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The current spot exchange rate is $1.15/ and the three-month forward rate is $1.25/. Based upon your crystal ball, you are pretty confident that the
The current spot exchange rate is $1.15/ and the three-month forward rate is $1.25/. Based upon your crystal ball, you are pretty confident that the spot exchange rate will be $1.00/ in three months. Assume that you would like to buy or sell 100,000. What actions would you take to speculate in the forward market? How much will you make if your prediction is correct?
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