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Calculate the gain or loss to the holder

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Question - Calculate the gain or loss to the holder and to the writer of the forward contract who agrees to buy foreign currencies at a specific price.

Assume that on May 1, the writer of the forward contract agrees to sell 3,000,000 foreign currencies at a specific price of $0.22 per foreign currency (FC) with delivery in 30 days (May 31). Assume the spot rate at the end of the forward period is $0.20.

What is the entry to the holder on May 1?

Explain how the value of the forward contract changes over time.

Reference no: EM132696291

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