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The three-month futures price for the British pound is $2660/. You expect the spot price three months from today to be $1.2980/. The British pound
- The three-month futures price for the British pound is $2660/. You expect the spot price three months from today to be $1.2980/. The British pound contract size is 62,500/ct.
- If you decide to buy 56 British pound futures contracts, how much money do you need today as your initial investment other than the margin you need to post?
- If you have available $1.4 million to speculate in the futures market as a buyer, how many contracts can you buy assuming no margin requirement?
- How much profit would you make if you buy 56 contracts and the spot price of the pound at futures expiration ended up at $1.2280/?
- If you were the representative of an MNC that sells parts and raw materials to a distributer in London for 12.25 million that are due to be received by the MNC in three months (A/R), would you buy or sell the pound futures if you decide to hedge the MNCs position?
- How many contracts would you buy or sell? What would be the dollar value of the MNCs exports when it receives the pound payment?
- How much would be the MNCs profit/loss from the foreign exchange transaction if the spot rate three months from today ended up at $1.3040/?
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