You enter into a FX forward that buy 1 million EUR with USD in two years when
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Question:
You enter into a FX forward that buy 1 million EUR with USD in two years when the spot rate is 1.20 (1 EUR = 1.20 USD) and the risk free interest rate in US is 2% and risk free interest rate in UK is 1%. One year later you decide to unwind the trade by entering 1Y forward in opposite direction as before when EUR/USD spot rate is 1.25 (1 EUR = 1.25 USD) and the US risk free rate is still 2% and risk free interest rate in UK is 1.5%. What is your market profit and loss in dollars?
A. +$50000
B. -$67287
C. +$32278
D. +$67287
Related Book For
Accounting Principles
ISBN: 978-0470533475
9th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
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