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3. The forward price of the Swiss franc for delivery in 50 days is quoted as 1.2000. The future price for a contract that wil
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Answer #1

The forward price on the Swiss franc for delivery in 50 days is quoted as 1.2000

It is quoted as the number of Swiss francs per dollar

The futures price for a contract that will be delivered in 50 days is 0.85.

It is quoted as number of dollars per Swiss franc

If forward price on the Swiss franc is also quoted like futures price for a contract in number of dollars per Swiss franc; then it will be 1/1.2000 = 0.8333 per Swiss franc

But the quote of the futures price for a contract is 0.85 per Swiss franc which is more favorable then the forward price on the Swiss franc.

Therefore, the Swiss franc is more valuable in the future contract than in the forward market.

Therefore future market is more attractive for an investor wanting to sell Swiss francs.

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