Question

Currently the spot price for the Japanese yen is ¥129.87/$ and the 6-month forward rate is ¥128.53/$. Jasper thinks the yen will move to ¥128.00/$ in the next six months. If Jasper buys $100,000 worth of yen at today's spot price her potential gain is ________ and her potential loss is ________.

Answer 1

D) unlimited; $100,000

Step-by-step explanation:

A) $100,000; unlimited

B) unlimited; unlimited

C) $100,000; $100,000

D) unlimited; $100,000

As Jasper has hedged it for 6 month forward rate of 128.53 so her gain is unlimited while the loss is restricted to the forward rate entered.