Risk of adverse xr fluctuations

Reference no: EM131029653

As we saw in class and in your text, some people or companies use forward contracts for delivery of foreign currencies in order to reduce their risk of adverse XR fluctuations (hedging). Others use these contracts to profit from their belief that they know how XR will change in the future (speculating). In each of these situations, indicate whether the US person would be a buyer or seller of £ for future delivery.

a) Donald Trump is selling one of his castles in Scotland in order to finance his campaign. The deal will close a month before the election.

b) I plan to visit London next fall.

c) In a magnanimous gesture, Donald Trump has agreed to purchase the British Crown Jewels in order to reduce the UK government debt. He will take delivery next December.

d) Let's pretend an election has been called for next September in the UK. A US speculator believes the Labour Party will win, contrary to expectations, and will introduce policies that will boost price inflation in the UK substantially.

Reference no: EM131029653

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