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The three-month futures price for the British pound is $3284/. You expect the spot price three months from today to be $1.2680/ and your friend
- The three-month futures price for the British pound is $3284/. You expect the spot price three months from today to be $1.2680/ and your friend expects that spot to be $1.3888/. The British pound futures contract size is 62,500.
- If you and your fried are speculators would you buy the futures contracts or sell them. Explain your answer (as in how your position works to your benefit or against it). Repeat for your friend.
- How much profit would you make if you trade 72 contracts and your expectations come true? How much would your friend make if your (not his) expectations come true?
- If you were an MNC with A/R (accounts receivable) of 42 million you expect to receive in three months, would you buy or sell the pound futures? Explain your answer in your own words (as in how your position works to your benefit or against it).
- How many contracts should you buy or sell? How much would be your pound A/R worth in dollars?
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