Consider the following: Assume the current market futures price is 1.66 CAD$/$.You borrow 167,000 CAD$, convert the proceeds to U.S.dollars, and invest them in the U.S.at the risk-free rate.You simultaneously enter a contract to purchase 170,340 CAD$ at the current futures price (maturity of 1 year).What would be your profit (loss)?
A)Profit of 630 CAD$
B)Loss of 2300 CAD$
C)Profit of 2300 CAD$
D)Loss of 630 CAD$

Question

Consider the following:  Assume the current market futures price is 1.66 CAD$/$.You borrow 167,000 CAD$, convert the proceeds to U.S.dollars, and invest them in the U.S.at the risk-free rate.You simultaneously enter a contract to purchase 170,340 CAD$ at the current futures price (maturity of 1 year).What would be your profit (loss)?
A)Profit of 630 CAD$ 
B)Loss of 2300 CAD$ 
C)Profit of 2300 CAD$ 
D)Loss of 630 CAD$

Quizplus · Accepted Answer

The Answer is A

Consider the Following: Assume the Current Market Futures Price