Question: Hello, I'm looking for help with Problem 4 in Chapter 7: Christoph Hoffeman trades currency for Kapinsky Capital of Geneva. Christoph has $10 million to
Hello, I'm looking for help with Problem 4 in Chapter 7:
| Christoph Hoffeman trades currency for Kapinsky Capital of Geneva. Christoph has $10 million to begin with, and he must state all profits at the end of any speculation in U.S. dollars. The spot rate on the euro is $1.3358/, while the 30-day forward rate is $1.3350/. | |||||
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| a. If Christoph believes the euro will continue to rise in value against the U.S. dollar, so that he expects the spot rate to be $1.3600/ at the end of 30 days, what should he do? | |||||
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| b. If Christoph believes the euro will depreciate in value against the U.S. dollar, so that he expects the spot rate to be $1.2800/ at the end of 30 days, what should he do? | |||||
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