Question

1) You just made a $10 million trade in which you sold $10mil against the Japanese...

1) You just made a $10 million trade in which you sold $10mil against the Japanese Yen with an exchange rate of USD/JPY = 104.32. The exchange rate is now 105.35. Answer the following: a) What is your P&L in United States Dollars (USD)?

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Answer #1
The trader sold $10 million against the Japanese Yen at an exchange rate of USD/JPY = 104.32
1USD = 104.32 JPY
When the trader sells $10 million against the Japanese Yen, the trader will receive
10000000*104.32 JPY
1043200000 JPY
The exchange rate is now 1USD = 105.35 JPY
1 JPY = .00949 USD
1043200000 JPY will now get the trader
1043200000*.00949
9899968 USD
The trader earlier had $10 million, so if the trader sells the 1.0432 billion JPY that the trader has (once the exchange rate changes to 105.35)
for dollars then the trader will receive
9899968 USD
The trader will be in a loss of $10000000 - $9899968
The trader will be in a loss of $100032
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