You are to receive €360,000 on May 16. Today’s spot rate is $1.10/€. The forward rate is $1.12/€. On May 16 the spot rate is $1.11/€. Futures contracts are for €125,000 each. On May 16 you, 1) close out the forward contracts, and 2) receive the €360,000 and exchange them for dollars. Q4. How much money did you make or lose on the contracts? Q5. When you combine the gain or loss on the futures contracts with the dollars exchanged for the €360,000 what was the dollar/euro total exchange rate? Q6. Why was the amount you received per euro more than the $1.12 future contract hedge amount?
You are to receive €360,000 on May 16. Today’s spot rate is $1.10/€. The forward rate is $1.12/€. On May 16 the spot rate is $1.11/€. Futures contracts are for €125,000 each. On May 16 you, 1) close out the forward contracts, and 2) receive the €360,000 and exchange them for dollars. Q4. How much money did you make or lose on the contracts? Q5. When you combine the gain or loss on the futures contracts with the dollars exchanged for the €360,000 what was the dollar/euro total exchange rate? Q6. Why was the amount you received per euro more than the $1.12 future contract hedge amount?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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You are to receive €360,000 on May 16. Today’s spot rate is $1.10/€. The forward rate is $1.12/€. On May 16 the spot rate is $1.11/€. Futures contracts are for €125,000 each.
On May 16 you, 1) close out the forward contracts, and 2) receive the €360,000 and exchange them for dollars.
Q4. How much money did you make or lose on the contracts?
Q5. When you combine the gain or loss on the futures contracts with the dollars exchanged for the €360,000 what was the dollar/euro total exchange rate?
Q6. Why was the amount you received per euro more than the $1.12 future contract hedge amount?
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