A company called american banking and trading has entered, Financial Management

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A company called american banking and trading has entered

A company called American Banking and Trading has entered into a long forward contract to buy 5 million British pounds at a price of $1.21. The contract has five months to go. The spot rate is currently $1.32. The British interest rate is 2.25% and the U.S. interest rate is 2.02%. Interest is calculated in the Eurodollar (add-on) manner. Determine the value of the contract.

A eurodollar is a US dollar deposit held in Europe or elsewhere outside the US.

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