Question: EXERCISE 6.1. (Forward) Current spot exchange rate is 1.33 EUR/USD. Two investors have taken now a position in a three-month forward which forward price is

EXERCISE 6.1. (Forward)

Current spot exchange rate is 1.33 EUR/USD. Two investors have taken now a position in a three-month forward which forward price is 1.35 EUR/USD. Both investors are European; hence, they are buying and selling dollars. $1,000,000 is the size of the forward contract. Who and how much will pay or collect if the spot exchange rate at the settlement date (3 months later) is 1.40 EUR/USD?

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