Problem
1. What explains the relationship between the spot rate and the forward rate?
2. What is the strategy of speculating in the forward market? In what other ways can one speculate on exchange-rate changes?
3. Distinguish between stabilizing speculation and destabilizing speculation.
4. If the exchange rate changes from $1.70 = £1 to $1.68 = £1, what does this mean for the dollar? For the pound? What if the exchange rate changes from $1.70 =£1 to $1.72 =£1?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.