Jin expects the ₤ to appreciate in the future. Expectation: The spot rate in three months:...
Jin expects the ₤ to appreciate in the future.
Expectation: The spot rate in three months: $1.25/₤ Available futures contract: Futures contract on pound @ $1.23/₤ Terms => Three months Size: ₤ 200,000
If Jin creates the futures contract, how much can Jin make?
a. $4,000 b. – $4,000 c. – $3,000 d. $3,000
Homework Answers
He can make money by buying futures contract at low price at selling at higher price at maturity.
Gain = (1.25-1.23)*200,000
= $4,000
Hence, the answer is a. $4,000
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Jin expects the ₤ to appreciate in the future.
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