Do problem 4 again assuming you believe the September 2010 spot price will be $0.70750 per 10 MXN.

Problem 4

Using the quotations in Exhibit 7.3, note that the September 2010 Mexican peso futures contract has a price of $0.77275 per 10 MXN. You believe the spot price in September will be $0.83800 per 10 MXN. What speculative position would you enter into to attempt to profit from your beliefs? Calculate your anticipated profits, assuming you take a position in three contracts. What is the size of your profit (lOSS) if the futures price is indeed an unbiased predictor of the future spot price and this price materializes?

CME Group Currency Futures Contract Quotations EXHIBIT 7.3 Change Open interest High Low Settle Open Currency Futures Japanese Yen (CME)-12,500,000; S per 100 June 1.0994 1.1008 127,331 5,904 1.0828 1.0849 -.0114 1.0994 1.0846 1.0866 -.0114 1.0996 Sept Canadian Dollar (CME)-CAD 100,000; $ per CAD .9482 .9457 .9615 .0094 105,183 9,962 .9641 June .9480 .9453 .9610 .0094 Sept British Pound (CME)-62,500; $ per June .9636 138,199 10,974 -.0020 1.4646 1.4772 1.4554 1.4643 1.4646 -.0020 Sept Swiss Franc (CME)-CHF 125,000; $ per CHF June Sept Australian Dollar (CME)-AUD 100,000; $ per AUD June 1.4655 1.4774 1.4557 -.0003 46,450 3,496 .8676 .8621 .8655 .8644 .8686 -.0004 .8701 .8646 .8679 104,151 6,247 .8413 .8265 .8354 -.0014 .8295 .8326 .8180 .8268 -.0013 Sept .8213 Mexican Peso (CME)-MXN 500,000; $ per 10MXN June .78000 .77275 78,059 751 .78175 .76850 .00700 .77075 .77400 .76175 .00725 Sept .76475 Euro (CME)-125,000; $ per June 1.2175 1.2240 -.0018 255,420 19,335 1.2216 1.2276 Sept Euro/British pound (CME)-125,000; per June 1.2229 1.2288 1.2189 1.2253 -.0018 .00010 11,107 170 .83300 .83805 .82800 .83590 .00005 Sept .83855 .83000 .83665 .83040 Euro/Japanese yen (CME) 125,000; per 113.05 112.71 1.01 1.01 112.82 112.78 7,309 527 June 111.09 111.18 Sept 112.50 111.60 Euro/Swiss franc (CME)-125,000; CHF per June 626 -.0017 -.0015 1.7048 1.6860 1.6919 3 1.6875 Sept