Answer
We should sold futures at the existing futures price of $1.59. Then as the spot rate of the pound declined, the futures price would decline and we can close out our futures position by purchasing a futures contract at a lower price.
Or, we can wait until the settlement date and purchase the pounds in the spot market, and fulfill the futures obligation by delivering pounds at the price of $1.59 per pound.
Assume that on November 1, the spot rate of the British pound was $1.58 and the...
On July 1, an American auto dealer enters into a contract to purchase 20 British sports cars with payment to be made in pounds on November 1. Each car costs 35,000 pounds. The dealer is concerned that the pound will strengthen over the next few months. The dealer plans to trade in December pound futures contracts. The December pound futures price is $1.278 per pound. Each contract is for delivery of 62,500 pounds. How many contracts should the...
A) The spot price of the British pound is currently $2.00. If the risk-free interest rate on 1-year Government bonds is 4% in the United States and 6% in the United Kingdom, what must be the forward price of the pound for delivery 1 year from now? B) Assume that the spot price of gold is $1,500 per troy ounce, the risk-free interest rate is 2%, and storage and insurance costs are zero. 1) What should be the forward price...
2. The three-month futures price for the British pound is $1.3160/£. You expect the spot price three months from today to be $1.3680/£. The British pound contract size is £62,500. a. If you decide to buy 68 British pound futures contracts, how much money do you need today as your initial investment other than the margin you need to post? b. If you have available $1.4 million to speculate in the futures market as a buyer, how many contracts can...
Suppose the spot rate and forward rate for the British pound are $1.25/₤ and $1.2/₤ respectively. Assume the forward pound is selling at an 8% (annualized) discount, what is the number of days of the forward contract? a. 60 days b. 90 days c. 180 days d. 30 days
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...
Quiz Instructions 4 pts Question 1 Assume that the British pound is trading at a spot price of US$1.45 per pound. Further assume that the premium of an American call option with a striking price of $1.44 is 2.10 cents. What are the intrinsic value and the time value of the call option (in cents) per pound, respectively? 1; 1.10 O0;2.10 O 2.10:0 O0.01;2.09 Question 2 4 pts Boeing just signed a contract to sell a Boeing 737 aircraft to...
Assume that the spot exchange rate of the British pound is $1.73/£. How will this spot rate adjust according to PPP if the United Kingdom experiences an inflation rate of 7 percent while the United States experiences an inflation rate of 2 percent?
Assume the spot price of the British pound is currently $1.85. If the risk-free interest rate on 1-year government bonds is 5.3% in the United States and 6.2% in the United Kingdom, what must be the forward price of the pound for delivery one year from now? (Do not round intermediate calculations. Round your answer to 3 decimal places.) Forward price
please round to the nearest cent or whatever it asks from you in the instructions on the British pound (£) to Tony Begay at Saguaro Funds. Tony Begay, a currency trader for Chicago-based Saguaro Funds, uses the following futures quotes, speculate on the value of the pound. a. If Tony buys 5 June pound futures, and the spot rate at maturity is $1.3985/£, what is the value of her position? b. If Tony sells 12 March pound futures, and the...
Assume the spot rate for the British pound is currently 15604 while the year forward rate is €15587. A risk tree asset in the United States is currently earning 26 percent of interest rate party holds, approximately what can you earn on a 1-year tree British security Ο Ο Ο Ο Ο Multiple Choice o 228% 228x o 223 223% o 246% лек o О 249% o О 23%