Today is 1 September and the spot exchange rate AUD 1.00 = NZD 1.22. That is, one AUD buys you ND 1.22.

You have no underlying position/commitments in ND but will merely speculate on exchange rate movements.

The six-month forward rate for AUD 1.00 = ND 1.18.

aIf you want to speculate on the NZD strengthening relative to the AUD, will you take a long or short forward

position in NZD (please answer long or short)

BOn maturity of this forward contract in six-month's time, the spot exchange rate is 1 05 (i.e. AUD 1.00 buys NZD 1.05). You close out the forward position with a new transaction equal in magnitude (ND 100,000) and opposite in sign to your original transaction in part b). What is your net position on the forward contracts?

CSusan shorts a futures contract today. Which of the following is most likely to be true?

Select one alternative:

O She will get dividends on the underlying asset.

O None of the above

O She agrees to sell the asset at a fixed price at a future date on the OTC

O She receives a premium today for shorting the futures