Suppose that the forward rate between $ and British Pound at 3 months is F=1 If you are a trader expecting that the spot rate in 3 months will be %, you should... *This means that that you can fix the rate at which you will be able to buy or sell BP in 3 months for $-1BP O You should contract today to sell forward foreign currency (British Pound) in the future for $0.5, expecting to be able to buy in 3 months at $1 O You should contract today to buy forward foreign aurrency (British Pound) in the future for $0.5, expecting to be able to sell in 3 months at $1 O You should contract today to buy forward foreign currency (British Pound) for $1, expecting to be able to sell in 3 months at $0.5 You should contract today to sell forward foreign currency (British Pound) for $1, expecting to be able to buy in 3 months at $0.5
Suppose that the forward rate between $ and British Pound at 3 months is F=1 If you are a trader expecting that the spot rate in 3 months will be %, you should... *This means that that you can fix the rate at which you will be able to buy or sell BP in 3 months for $-1BP O You should contract today to sell forward foreign currency (British Pound) in the future for $0.5, expecting to be able to buy in 3 months at $1 O You should contract today to buy forward foreign aurrency (British Pound) in the future for $0.5, expecting to be able to sell in 3 months at $1 O You should contract today to buy forward foreign currency (British Pound) for $1, expecting to be able to sell in 3 months at $0.5 You should contract today to sell forward foreign currency (British Pound) for $1, expecting to be able to buy in 3 months at $0.5
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Suppose that the forward rate between S and British Pound at 3
months is F=1* If you are a trader expecting that the spot rate in 3
months will be %, you should...
*This means that that you can fix the rate at which you will be able to
buy or sell BP in 3 months for $-1BP
You should contract today to sell forward foreign currency (British Pound) in the future for $0.5, expecting to be able to buy in 3
months at $1
CO You should contract today to buy forward foreign currency (British Pound) in the future for $0.5, expecting to be able to sell in 3
months at $1
O You should contract today to buy forward foreign currency (British Pound) for $1, expecting to be able to sell in 3 months at $0.5
You should contract today to sell forward foreign currency (British Pound) for $1, expecting to be able to buy in 3 months at $0.5
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