Suppose the current spot exchange rate is $1.20/euro. The curre nt 90day forward exchange rate...
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Accounting
Suppose the current spot exchange rate is $1.20/euro. The curre
nt 90day forward exchange rate is
$1.18/euro. You expect the spot rate to be $1.22/euro in 90 day
s.
a.
How would you speculate using
a forward contract? (8 points)
b.
If many people speculate in this way, what pressure is placed o
n the value of the current forward exchange
rate?
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