An investor enters into a short forward contract to sell ¥50,000 for U.S. dollars at an exchange rate of ¥110/$1. a) How much does the investor gain or lose if the exchange rate at the end of the contract is ¥108/$1? b) Did ¥ appreciate or depreciate against $ in part a)? c) Why do you think that the investor is entering into a short forward contract to sell ¥50,000? d) How much does the investor gain or lose if the exchange rate at the end of the contract is ¥112/$1?
An investor enters into a short forward contract to sell ¥50,000 for U.S. dollars at an exchange rate of ¥110/$1. a) How much does the investor gain or lose if the exchange rate at the end of the contract is ¥108/$1? b) Did ¥ appreciate or depreciate against $ in part a)? c) Why do you think that the investor is entering into a short forward contract to sell ¥50,000? d) How much does the investor gain or lose if the exchange rate at the end of the contract is ¥112/$1?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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An investor enters into a short forward contract to sell ¥50,000 for U.S. dollars at an exchange rate of ¥110/$1.
a) How much does the investor gain or lose if the exchange rate at the end of the contract is ¥108/$1?
b) Did ¥ appreciate or
c) Why do you think that the investor is entering into a short forward contract to sell ¥50,000?
d) How much does the investor gain or lose if the exchange rate at the end of the contract is ¥112/$1?
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