Multiple Choice
The current spot exchange rate is $1.45/€ and the three-month forward rate is $1.55/€.Based upon your economic forecast,you are pretty confident that the spot exchange rate will be $1.50/€ in three months.Assume that you would like to buy or sell €100,000.What actions would you take to speculate in the forward market? How much will you make if your prediction is correct?
A) Take a short position in a forward.If you're right you will make $15,000.
B) Take a long position in a forward contract on euro.If you're right you will make $5,000.
C) Take a short position in a forward contract on euro.If you're right you will make $5,000.
D) Take a long position in a forward contract on euro.If you're right you will make $15,000.
Correct Answer:
Verified
Correct Answer:
Verified
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