Multiple Choice
The current spot exchange rate is $1.55/€ and the three-month forward rate is $1.50/€.Based on your analysis of the exchange rate,you are confident that the spot exchange rate will be $1.52/€ in three months.Assume that you would like to buy or sell €1,000,000.What actions do you need to take to speculate in the forward market?
A) Take a long position in a forward contract on €1,000,000 at $1.50/€.
B) Take a short position in a forward contract on €1,000,000 at $1.50/€.
C) Buy euro today at the spot rate,sell them forward.
D) Sell euro today at the spot rate,buy them forward.
Correct Answer:
Verified
Correct Answer:
Verified
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