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Homework answers / question archive / What is the size of a difference check on a 1-Year short forward GBP contract given that the size of the contract is GBP 280,000; the one-year forward rate is F1USD/GBP = 1
What is the size of a difference check on a 1-Year short forward GBP contract given that the size of the contract is GBP 280,000; the one-year forward rate is F1USD/GBP = 1.56; and X1USD/GBP = 1.50?
A. Profit of USD 16,800
B. Loss of USD 16,800
C. Profit of USD 11,200
D. Loss of USD 11,200
Solution :
Given Sale of forward contract at Forward rate 1GBP = 1.56$
The Rate at the end of Year 1 1GBP = 1.50$
Size of the contract = GBP 280000
Profit on sale of each pound = 1.56$-1.50$ =0.06$
Total Profit = GBP 280000 * 0.06$ = 16800 $
