2. The three-month futures price for the British pound is $1.3160/£. You expect the spot price...
1. The three-month futures price for the British pound is $1.3160/£. You expect the spot price three months from today to be $1.2690/£. The British pound futures contract size is £62,500. a. If you are a speculator would you buy the futures contracts or short (sell) them. Explain your answer in your own words. b. How much profit would you make if you trade 62 contracts and your expectations come true? c. If you were an MNC with A/R (accounts...
Jack Hemmings bought a 3-month British pound futures contract for $1.4400 British pound only to see the dollar appreciate to a value of $1.4250 at which he sold the pound futures. If each pound futures is for an amount of British pound 62,500, how much money did jack gain or lose from his speculation with pound futures? Alcoa has a DKr 3 million receivable due in 6 months. What value can Alcoa lock-in for its receivable if it executes a...
A US firm sold goods to a British firm at an agreed price of 2,812,500 GBP which it will receive in December. The choose to manage this exposure using CME futures contracts: -Contract: GBP / USD Futures Expiry: December Price: 1.6491 size: 62,500 GBP maintenance margin: 1500USD initial margin: 110% of maintenance margin settlement: physical delivery current spot value of the pound is 1.6524 a) how many futures contracts will they use to hedge their exposure and will they buy...
The current spot exchange rate is $1.50/€ and the three-month forward rate is $1.55/€. Based on your analysis of the exchange rate, you are confident that the spot exchange rate will be $1.62/€ in three months. Assume that you would like to buy or sell €1,000,000. What actions do you need to take to speculate in the forward market? What is the expected dollar profit from speculation? A) Sell €1,000,000 forward for $1.50/€. B) Buy €1,000,000 forward for $1.55/€. C)...
A German investor holds a portfolio of British stocks. The market value of the portfolio is £20 million, with a ß of 1.5 relative to the FTSE index. In November, the spot value of the FTSE index is 4,000. The dividend yield, euro interest rates, and pound interest rates are all equal to 4% (flat yield curves). The German investor fears a drop in the British stock market (but not in the British pound). The size of FTSE stock index...
You bought British pound call option at a premium of $0.11 per unit. The exercise price is $1.73. In three months (right before your option expires), you can buy British pounds for $1.73 per unit in the spot market. What will be your net profit? OA.-50.11 . B. $0 OC. $0.09 OD. $0.20
You bought British pound call option at a premium of $0.11 per unit. The exercise price is $1.73. In three months (right before your option expires), you can buy British pounds for $1.93 per unit in the spot market. What will be your net profit? OA $0.11 OB. $0 OC. $0.09 D. $0.20 Reset Selection
You bought British pound put option at a premium of $0.07 per unit. The exercise price is $1.73. In three months (right before the option expires), one can buy British pounds for $1.53 per unit in the spot market. What will be your net profit? OA. -$0.07 OB. $0 OC. 50.13 . D. $0.20 Reset Selection
You bought British pound put option at a premium of $0.07 per unit. The exercise price is $1.73. In three months (right before the option expires), one can buy British pounds for $1.93 per unit in the spot market. What will be your net profit? A.-30.07 OB. 50 OC $0.13 OD. 50.20 Reset Selection
3. You have $12,500 that you want to use to speculate in yen options. The spot rate is ¥108.84/$. You think that, at this rate, the yen is underpriced and, therefore, you expect it to substantially appreciate against the dollar in the coming few weeks. You decide to use your $12,500 to act on your expectations. The yen three-week calls and puts with an exercise price of $0.009000/\ are selling for (i.e. premiums are) $0.000200/¥ and $0.000400/yen respectively. (Each yen...