The current spot exchange-rate is $1.20/euro. The current 90-day forward exchange rate is $1.18/euro. You expect the spot rate to be $1.22/euro in 90 days. How would you speculate using a forward contract? If many people speculate in this way, what pressure is placed on the value of the current forward exchange rate?

A company must pay liabilities of 3000 and 5000 at the end of years 2 and 4, respectively. The only investments available to the company are the following two zero-coupon bonds: 1. Effective Annual Yield Par 5.5% 6.8% Maturity (years) 1000 100