The rate on euro-denominated t-bills

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Reference no: EM131931300

1. Suppose the (riskless) rate on Euro-denominated T-bills is lower than the U.S. Treasury bill rate. If the spot rate S is quoted $ per Euro, would you expect that the forward rate F (also $/Euro) will be higher or lower than S? Explain. Does this indicate whether the Euro will rise or decline in value in the future? Explain.

2. Explain why futures contracts can be viewed as an over-under investment decision. Explain (generally) when you may wish to be long as opposed to other times when you may wish to be short futures contracts?

Reference no: EM131931300

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