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A bank manager believes the peso will appreciate relative to the peso in six months. The...

A bank manager believes the peso will appreciate relative to the peso in six months. The current spot rate for pesos is 10 pesos/euro and the six month forward rate is .08/peso. The manager agrees to enter into a six month forward contract with 6 million pesos attached. The spot rate is 20 pesos/euro on the day the forward contract expires.

Find the currency trader's profit/loss (in euros) from their forward contract. Round intermediate steps to four decimals and your final answer to two decimals.Do not use currency symbols or words when entering your response.

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Answer #1

Spot rate = 10 pesos/euro

Euros bought = 6 million/10 = 0.6 million euros

After, 6 months, he sells at 0.08 euro/peso = 0.6/0.08 pesos = 7.5 million pesos

Profit = 7.5 million - 6 million = 1.5 million pesos

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