Using the quotations in Exhibit 7.3, note that the September 2010 Mexican peso futures contract has...

Question

Using the quotations in Exhibit 7.3, note that the September 2010 Mexican peso futures contract has a price of $ XXXXXXXXXXper 10 MXN. You believe the spot price in September will be $ XXXXXXXXXXper 10 MXN. What speculative position would you enter into to attempt to profit from your beliefs? Calculate your anticipated profits, assuming you take a position in three contracts. What is the size of your profit (loss) if the futures price is indeed an unbiased predictor of the future spot price and this price materializes?

David · Accepted Answer

If you expect the Mexican peso to rise from $0.77275 to $0.83800 per 10 MXN, youwould take a long position in futures since the futures price of $0.77275 is less than yourexpected spot price.
If you expect the Mexican peso to rise from $0.77275 to $0.83800 per 10 MXN,

Using the quotations in Exhibit 7.3, note that the September 2010 Mexican peso futures contract has a price of $ XXXXXXXXXXper 10 MXN. You believe the spot price in September will be $ XXXXXXXXXXper...

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