Answer:
Check the explanation
Explanation:
a. Calculate Christoph’s expected profit assuming a pure spot market speculation strategy.
Details Amount
Number of Swiss francs can buy and
invest with $100,000 ($100,000/$0.5820) 171821.31
After 3 months SF's are sold to acquire
dollars back SF 171821.31* $0.6250) $107,388
Less: Invested dollars $ 100,000.00
expected profit assuming he buys or sells
SF three months forward $7,388
b. Calculate C’s expected profit assuming he buys or sells SF three months forward:
Details Amount
Number of Swiss francs can buy and
invest with $100,000 ($100,000/$0.5640 $ 177304.96
After 3 months SF's are sold to acquire
dollars back SF 177,304.96* $0.6250) $ 110,815.60
Less: Invested dollars $ 100,000.00
expected profit assuming he
buys or sells SF three months forward $10,816
