Question

Laura Cervantes is a currency speculator and she sells eight June futures contracts for 500,000 pesos at the futures price of 0.10773 $/MXN.
a) What is the value of her position at maturity if the ending spot rate is $0.12002/MXN?
b) What is the value of her position at maturity if the ending spot rate is $0.09802/MXN?

Answer 1

Answer:

500,000 Pesos (MXN) is the June Futures Contract

Number of Contracts Sold = 8

Initial Exchange Rate = 0.10773$ / MXN

Initial Position Value = 8 x 500000 x 0.10773

Initial Position Value = $430,920

i. Final Exchange Rate = $0.12002 / MXN

Final Position Value = 8 x 500000 x 0.12002 = $480,080

Net Position Value = 430920 - 480080 = - $49,160

ii. Final Exchange Rate = $0.09802 / MXN

Final Position Value = 8 x 500000 x 0.09802 = $392,080

Net Position Value = 430920 - 392080 = $3,884