Fritz Schumer of Zurich Capital believes the Swiss franc will appreciate versus the U.S. dollar...
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Fritz Schumer of Zurich Capital believes the Swiss franc will appreciate versus the U.S. dollar in the coming three-month period. He has $100,000 to invest. The current spot rate is $1.0125/SFr, the three-month forward rate is $1.0150/SFr, and he expects the spot rates to reach $1.0300/SFr in three months.
a. Calculate the expected profit assuming a spot market speculation strategy (i.e. buy SFr today and hold).
b. Calculate the expected profit assuming he buys or sells SFr three months forward.
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