Maurice Tutor

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    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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    Phoniex University
    Oct-2001 - Nov-2016

Category > Accounting Posted 23 Aug 2017 My Price 8.00

zero transaction costs

18     Speculating with currency futures. Assume that a March futures contract on Mexican pesos was avail- able in January for $0.09 per unit. Also assume that forward contracts were available for the same settle- ment date at a price of $0.092 per peso. How could speculators capitalize on this situation, assuming zero transaction costs? How would such speculative activity affect the difference between the forward contract price and the futures price?

 

 

 

Forward Contract

Futures Contract

Options Contract

 

Forward purchase

Forward sale

Buy futures

Sell futures

Purchase call

Purchase put

a. George Ltd plans to purchase Japanese goods denominated in yen.

 

 

 

 

 

 

b. Harvard Ltd will sell goods to Japan, denominated in yen.

 

 

 

 

 

 

c. Yale plc has a subsidiary in Australia that will be remitting funds to the UK parent.

 

 

 

 

 

 

d. Brown Ltd needs to pay off existing loans that are denominated in Canadian dollars.

 

 

 

 

 

 

e. Princeton Ltd may purchase a company in Japan in the near future (but the deal may not go through).

Answers

Maurice Tutor
(5)
Status NEW Posted 23 Aug 2017 10:08 PM My Price 8.00

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