What do you think would happen to the futures price

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Reference no: EM131325138

Assume that, on 1 November, the spot rate of the £/US$ was $1.58 and the price on a December futures contract was $1.59. Assume that the pound depreciates over November, so that by 30 November it is worth $1.51.

(a) What do you think would happen to the futures price over the month of November? Why?

(b) If you expected this to occur, would you have purchased or sold a December futures contract on GBP on 1 November? Explain.

Reference no: EM131325138

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