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An investor enters into a short forward contract to sell ¥50,000 for U.S. dollars at an exchange rate of ¥110/$1. a) How much does the investor gain or lose if the exchange rate at the end of the contract is ¥108/$1? b) Did ¥ appreciate or depreciate against $ in part a)?

An investor enters into a short forward contract to sell ¥50,000 for U.S. dollars at an exchange rate of ¥110/$1. a) How much does the investor gain or lose if the exchange rate at the end of the contract is ¥108/$1? b) Did ¥ appreciate or depreciate against $ in part a)?

Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter27: Multinational Financial Management
Section: Chapter Questions
Problem 1P
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An investor enters into a short forward contract to sell ¥50,000 for U.S. dollars at an exchange rate of ¥110/$1.

a) How much does the investor gain or lose if the exchange rate at the end of the contract is ¥108/$1?

b) Did ¥ appreciate or depreciate against $ in part a)?

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