Speculating with currency futures

Reference no: EM1344721

Speculating with Currency Futures: Suppose that a March futures contract on Mexican Peso was available in January for $.09 per unit. Also suppose that forward contracts were available for same settlement date at a price of $0.092 per peso.

a. How could speculators capitalize on this situation, assuming zero transaction costs?

b. How would such speculative activity affect the difference between the forward contract price and the futures price? Explain.

Reference no: EM1344721

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