Question

# Laura Cervantes is a currency speculator and she sells eight June futures contracts for 500,000 pesos...

Laura Cervantes is a currency speculator and she sells eight June futures contracts for 500,000 pesos at the futures price of 0.10773 \$/MXN.

a) What is the value of her position at maturity if the ending spot rate is \$0.12002/MXN?

b) What is the value of her position at maturity if the ending spot rate is \$0.09802/MXN?

#### Homework Answers

Answer #1

1 June Futures Contract = 500000 Pesos (MXN) and Number of Contracts Sold = 8

Initial Exchange Rate = 0.10773 \$ / MXN

Initial Position Value = 8 x 500000 x 0.10773 = \$ 430920

(a) Final Exchange Rate = \$ 0.12002 / MXN

Final Position Value = 8 x 500000 x 0.12002 = \$ 480080

Net Position Value = 430920 - 480080 = - \$ 49160

(b) Final Exchange Rate = \$ 0.09802 / MXN

Final Position Value = 8 x 500000 x 0.09802 = \$ 392080

Net Position Value = 430920 - 392080 = \$ 38840

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