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The current spot exchange rate is E $/ = 1.32 and the 3-month forward rate is F $/ = 1.26. Based on your analysis of
The current spot exchange rate is E$/ = 1.32 and the 3-month forward rate is F$/ = 1.26. Based on your analysis of the exchange rate, you are confident that the spot exchange rate will be E$/ = 1.29 in three months. Assume also that you would like to buy or sell 1,000,000. What actions do you need to take to speculate in the forward market? What is the expected dollar profit from speculation?
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