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To calculate Christoph's expected profit assuming a pure spot market speculation strategy, follow the steps below: First, use the $100,000 today to buy Swiss francs
To calculate Christoph's expected profit assuming a pure spot market speculation strategy, follow the steps below: First, use the $100,000 today to buy Swiss francs at the spot rate. To calculate the value of the Swiss francs, use the following formula: ValueofSwissfrancspurchasedtoday=CurrentspotrateInitialinvestment Hold the Swiss francs and at the end of three months, convert the Swiss francs at the expected spot rate. To calculate the US dollar value, use the following formula: US$valueinthreemonths=ValueofSwissfrancspurchasedExpectedspotrate To calculate the profit, use the following formula: Profit = US $ value in three months - Initial investment Kapinsky Capital Geneva (B). Christoph Hoffeman of Kapinsky Capital believes the Swiss franc will appreciate versus the U.S. dollar in the coming 3-month period. He has $100,000 to invest. The current spot rate is $0.5825/SF, the 3-month forward rate is $0.5639/SF, and he expects the spot rates to reach $0.6252/SF in three months. a. Calculate Christoph's expected profit assuming a pure spot market speculation strategy. b. Calculate Christoph's expected profit assuming he buys or sells SF three months forward. a. Calculate Christoph's expected profit assuming a pure spot market speculation strategy. Christoph's expected profit assuming a pure spot market speculation strategy is $. (Round to the nearest cent.)
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