On Monday morning, a trader takes a long position in Australian dollars (AUD) future currency contract that matures on Thursday afternoon. The agreed upon price is USD76691/AUD for a currency lot of AUD100,000. A trader needs AUD 175,000. At the close of trading on Monday, the futures price falls to USD0.76620 = 1 AUD. At Tuesday close, the price further falls down to USD0.76602 = 1 AUD. At Wednesday close, the price rises to USD0.76658 = 1 AUD. At Thursday close, the price further rises to USD0.76698 = 1 AUD and the contract matures. The trader takes delivery of the AUD at the prevailing price of USD0.76698 = 1 AUD. What will be the trader’s profit (loss)? Gain of USD 7 Gain of USD 70 Loss of USD 7 Loss of USD 70
On Monday morning, a trader takes a long position in Australian dollars (AUD) future currency contract that matures on Thursday afternoon. The agreed upon price is USD76691/AUD for a currency lot of AUD100,000. A trader needs AUD 175,000. At the close of trading on Monday, the futures price falls to USD0.76620 = 1 AUD. At Tuesday close, the price further falls down to USD0.76602 = 1 AUD. At Wednesday close, the price rises to USD0.76658 = 1 AUD. At Thursday close, the price further rises to USD0.76698 = 1 AUD and the contract matures. The trader takes delivery of the AUD at the prevailing price of USD0.76698 = 1 AUD. What will be the trader’s profit (loss)? Gain of USD 7 Gain of USD 70 Loss of USD 7 Loss of USD 70
Chapter5: Currency Derivatives
Section: Chapter Questions
Problem 41QA
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On Monday morning, a trader takes a long position in Australian dollars (AUD) future currency contract that matures on Thursday afternoon. The agreed upon price is USD76691/AUD for a currency lot of AUD100,000. A trader needs AUD 175,000. At the close of trading on Monday, the futures price falls to USD0.76620 = 1 AUD. At Tuesday close, the price further falls down to USD0.76602 = 1 AUD. At Wednesday close, the price rises to USD0.76658 = 1 AUD. At Thursday close, the price further rises to USD0.76698 = 1 AUD and the contract matures. The trader takes delivery of the AUD at the prevailing price of USD0.76698 = 1 AUD. What will be the trader’s
- Gain of USD 7
- Gain of USD 70
- Loss of USD 7
- Loss of USD 70
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