Answer:
The correct answer for option (a) is $1.15 and for option (b) is $1.33.
Explanation:
According to the scenario, the given data are as follows:
Present value (PV) = $1
Rate of interest (R) = 1.18% per month
Time period (for option a) (t1)= 12 months
Time period ( for option b) (t2)= 24 months
So, we can calculate the future value by using following formula:
FV = PV × ( 1 + R )^t
(a). By putting value in the formula:
FV = $1 ( 1 + 0.0118)^12
= $1 × 1.1511610877
= $1.15
FV = PV × ( 1 + R )^t
(b). By putting value in the formula:
FV = $1 ( 1 + 0.0118)^24
= $1 × 1.32517184983
= $1.33
Answer:
Profit of $3000
Explanation:
The exchange rate of a future contract is usually fixed at the time when the contract is buy 100,000 euros at a futures contract price of $1.22.
The Value in dollars at the time is: $122,000
At the maturity spot rate of the euro is $1.25.
The value of the contract is: $125,000
The difference:
$125,000-122,000
=$3000.
Since the maturity spot rate is higher, there is a profit of $3000 from speculating with the futures contract.
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The metal coins are/were made from is worth more tangibly than the paper that currency notes were written on.
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