You believe the Swiss franc will appreciate versus the U.S. dollar in the coming three-month period and have $100,000 to invest. The current spot rate is $0.5640/CHF, the three-month forward rate is $0.5820/CHF, but you expect spot rates to reach $0.6250/CHF in three months.

a. Calculate the expected profit from a pure spot market speculation strategy.

b. Calculate the expected profit assuming that you buy or sell the SF three months forward (whichever is appropriate).

c. Why might you prefer the forward contract to the spot market strategy?