A leader in your firm has been studying the foreign exchange market for a number of years and believes that she can predict several of the foreign currency exchange rates relative to the U.S. dollar. The firm has $150,000 to invest in the spot, forward, or options markets. The spot rate is $1.2622 to the euro, and in 12 months, the forward rate is $1.2905 to the euro. However, this leader is sure that the exchange rate in 12 months will be $1.33 to the euro. Explain how she can speculate on the belief that the euro will be $1.33 in 12 months. Calculate the amount of profit (ignoring exchange rate fees) that will be earned and the percentage return achieved.

Are people really encouraged to ask you to do their homework here? Hardly honest! If she had a question about it, that would be different...

YoungHyperLink, no they aren't "encouraged" to ask for their homework to be done here. If you look at the top of the page, at the big red print, it even says they should post their attempts to do the problem first. No, it's not honest. I'm sure some have their attempts and just don't post them... in which case they could post those when we ask for them.

Most of us don't do it for them - we check their work or give hints, etc. Unfortunately some do come on and just do people's homework for them.