Business, 15.08.2020 17:01 emmalado45

Exchange rate is currently $1.85 US per 1 British pound. Interest rate is 4% in the US and 3% in the UK. A bank is short a futures contract on 1,000,000 pounds with F= $1.9 million in one year. Use regular compounding (not continuous). a. Find the expected future spot exchange rate using the interest rate parity
b. When is the bank facing losses: if the pound will appreciate, or if the pound will depreciate?
c. Write the expression for the present value of the bank's short futures position, as a function of current spot exchange rate S
d. Find the delta of the bank's position.

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Exchange rate is currently $1.85 US per 1 British pound. Interest rate is 4% in the US and 3% in the...

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