Question 4 10 marks The current spot exchange rate is $1 45 and the six month forward rate is $1 52 Based on your analysis of the exchange rate, you are confident that the spot exchange rate will be $1 50 in six months Assume that you would like to buy or sell $10,000 What actions do you need to take to speculate in the forward market What is the expected dollar profit from speculation (6 marks) What would be your speculative profit in dollar terms if the spot exchange rate turns out to be $1 48 after 6 months (4 marks)

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Question: Question 4: 10 marks The current spot exchange rate is $1.45/ and the six-month forward rate is $1.52/. Based on your analysis of the exchange

Question 4: 10 marks

The current spot exchange rate is $1.45/ and the six-month forward rate is $1.52/. Based on your analysis of the exchange rate, you are confident that the spot exchange rate will be $1.50/ in six months. Assume that you would like to buy or sell $10,000.

What actions do you need to take to speculate in the forward market? What is the expected dollar profit from speculation? (6 marks)
What would be your speculative profit in dollar terms if the spot exchange rate turns out to be $1.48/ after 6 months? (4 marks)

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