Kapinsky Capital Geneva (A). Christoph Hoffeman trades currency for Kapinsky Capital of Geneva. Christoph has $10 million to begin with, and he must state all profits at the end of any speculation in U.S. dollars. The spot rate on the euro is $1.3358/€, while the 30-day forward rate is $1.3350/€.
a. If Christoph believes the euro will continue to rise in value against the U.S. dollar, so that he expects the spot rate to be $1.3600/€ at the end of 30 days, what should he do?
b. If Christoph believes the euro will depreciate in value against the U.S. dollar, so that he expects the spot rate to be $1.2800/€ at the end of 30 days, what should he do?