Problem 1
If the speculator of Problem 9 believes that the spot rate in three months will be SR = $1.95/£1, how can he or she speculate in the forward market? How much will the speculator earn if he or she is correct? What will the result be if in three months SR = $2.05/£1 instead?
Problem 2
Assume that the three month FR = $2.00/£1 and a speculator believes that the spot rate in three months will be SR = $2.05/£1. How can a person speculate in the forward market? How much will the speculator earn if he or she is correct?
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.